Heteroskedastic

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DEFINITION of 'Heteroskedastic'

A measure in statistics that refers to the variance of errors over a sample. Heteroskedasticity is present in samples where random variables display differing variabilities than other subsets of the variables. Such results can cause errors in regression analysis and other statistical measures in which statistical measures can be incorrectly justified.

INVESTOPEDIA EXPLAINS 'Heteroskedastic'

Most financial instruments, such as stocks, follow a heteroskedastic error pattern. For example, in regression, a mathematical relationship between a stock and some other type of measure is to be discovered over a period of time. The error found between the line of best fit and the actual data point will vary; for instance, as each variable gets larger the error may increase.

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