Welcome

Anti Essays offers essay examples to help students with their essay writing.

Sign Up

Heterocedasticity Essay

Open Document

Below is an essay on "Heterocedasticity" from Anti Essays, your source for research papers, essays, and term paper examples.

Definition

  *
  * Variances of     are not the same.
  * Conditional variances of     are no longer constant.
  * Sources of heteroscedasticity:
  * Following the error-learning models, as people learn, their errors of behavior become smaller over time or the number of errors becomes more consistent.
  * As incomes grow, people have more discretionary income and hence more scope for choice about the disposition of their income.
  * As data collecting technique improve,     is likely to decrease.
  * Heteroscedasticity can also arise as a result of the presence of outliers.
  * Skewness in the distribution of one or more regressors included in the model.
  * Incorrect data transformation and incorrect functional form.

Detection
  * By graphical method
 
Do not have constant variance

  * By formal method
      * Park test
        * Functional form
        * Since       is generally not known, Park suggest using       as a proxy and running the following regression:
        * If β turn out to be statistically significant, it would suggest that heteroscedasticity is present in the data.
      * Glejser test
        * Similar in spirit to the Park test. After obtaining the residuals       from the OLS regression, Glejser suggest the absolute values of       on the     variable that is thought to be closely associated with       . In his experiments, Glejser uses the following functional term:

        * The error term   has some problem in that its expected value is nonzero, it is serially correlated and ironically, it is heteroscedasticity.
      * Spearman’s Rank Correlation test

        * Step 1: Fit the regression to the data on Y and X and obtain the residuals     .
        * Step 2: Ignoring the sign of     , that is, taking their absolute value       , rank both       and     (or       ) according to an ascending order and compute the Spearman’s rank correlation coefficient given previously.
        * Step 3:...

Show More


  • Submitted by: woooo
  • on February 24, 2011
  • Category: Business and Economics
  • Length: 731 words
  • Views: 500
  • Popularity Rank: 332512
  • 1 rating(s)

Citations

MLA Citation

"Heterocedasticity". Anti Essays. 11 Dec. 2018

<http://cassandralynndesignllc.com/free-essays/Heterocedasticity-74013.html>

APA Citation

Heterocedasticity. Anti Essays. Retrieved December 11, 2018, from the World Wide Web: http://cassandralynndesignllc.com/free-essays/Heterocedasticity-74013.html