Quick Definition

Heteroskedasticity refers to the condition in which the variability of a variable is unequal across the range of values of a second variable that predicts it.

Formula

Examples

• 1In finance, the volatility of stock returns might increase as the stock price rises, indicating heteroskedasticity.
• 2In real estate, the variance in house prices could be higher in luxury markets compared to more affordable segments.
• 3In economic data, the error variance of GDP growth predictions might increase at higher levels of GDP due to heteroskedasticity.

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