Ch10 - The Nature of Heteroskedasticity The Consequences of

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Unformatted text preview: The Nature of Heteroskedasticity The Consequences of Heteroskedasticity Testing for Heteroskedasticity Remedies for Heteroske Chapter 10 Hetroskedasticity Masao Ogaki Department of Economics, Ohio State University November 17, 2007 Masao Ogaki Department of Economics, Ohio State University Chapter 10 Hetroskedasticity The Nature of Heteroskedasticity The Consequences of Heteroskedasticity Testing for Heteroskedasticity Remedies for Heteroske The Nature of Heteroskedasticity Heteroskedasticity is the violation of the Classical Assumption V, which states that that the disturbances i are homoskedastic; that is, they all have the same variance, 2 . If this is not the case, the variance of i is different from observation to observation - we have the case of heteroskedasticity. Assumption V assumes that Var ( i ) = E ( 2 ) = 2 = aconstant ( i = 1 , 2 , ..., N ) (1) With Heteroskedasticity, Var ( i ) == E ( 2 ) = 2 i ( i = 1 , 2 , ..., N ) (2) See Figures 10.1, 10.2, and 10.3. Masao Ogaki Department of Economics, Ohio State University Chapter 10 Hetroskedasticity The Nature of Heteroskedasticity The Consequences of Heteroskedasticity Testing for Heteroskedasticity Remedies for Heteroske...
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Ch10 - The Nature of Heteroskedasticity The Consequences of

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