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.
Next Up
BREAKING DOWN '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.
RELATED TERMS

Line Of Best Fit
A straight line drawn through the center of a group of data points ... 
Poisson Distribution
A statistical distribution showing the frequency probability ... 
Autocorrelation
A mathematical representation of the degree of similarity between ... 
Sampling Error
A statistical error to which an analyst exposes a model simply ... 
Regression
A statistical measure that attempts to determine the strength ... 
Homoskedastic
A statistics term indicating that the variance of the errors ...
Related Articles

Budgeting
The P/E Ratio: A Good MarketTiming Indicator
Check out the returns this newer technical analysis tool would've yielded over the period from 1920 to 2003. 
Technical Indicators
The Gann Studies
Learn why this pioneer of technical analysis believed it's possible to predict the future. 
Fundamental Analysis
Using Decision Trees In Finance
A decision tree provides a comprehensive framework to review the alternative scenarios and consequences a decision may lead to. 
Economics
Understanding Tragedy of the Commons
The tragedy of the commons describes an economic problem in which individuals try to reap the greatest benefits from a given resource. 
Fundamental Analysis
Return on Investment (ROI) Vs. Internal Rate of Return (IRR)
Read about the similarities and differences between an investment's internal rate of return (IRR) and its return on investment (ROI). 
Economics
Current Probability of Donald Trump as President
Predict the current odds of a Donald Trump presidency, and understand the factors that have kept him on top and the looming challenges he faces. 
Investing Basics
Understanding the Random Walk Theory
The random walk theory states stock prices are independent of other factors, so their past movements cannot predict their future. 
Investing Basics
A Simplified Approach To Calculating Volatility
Volatility is sometimes greater than anticipated, but the way it’s measured can compound the problems that occur when it’s unexpected. 
Investing Basics
Why Blue Chip Stocks Are Key to Buyand Hold Investing
Several blue chip stocks have proven that buyandhold investing still works, even after the huge declines of the Great Recession. 
Mutual Funds & ETFs
Are Your ETFs Too Risky? Learn How to Evaluate Them
Learn how to identify ETFs with greater risk and volatility. See why some investors include higher volatility ETFs in pursuit of greater returns.
RELATED FAQS

Is Colombia an emerging market economy?
Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >> 
What assumptions are made when conducting a ttest?
The common assumptions made when doing a ttest include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >> 
What are some of the more common types of regressions investors can use?
The most common types of regression an investor can use are linear regressions and multiple linear regressions. Regressions ... Read Full Answer >> 
What types of assets lower portfolio variance?
Assets that have a negative correlation with each other reduce portfolio variance. Variance is one measure of the volatility ... Read Full Answer >> 
When is it better to use systematic over simple random sampling?
Under simple random sampling, a sample of items is chosen randomly from a population, and each item has an equal probability ... Read Full Answer >> 
What are some common financial sampling methods?
There are two areas in finance where sampling is very important: hypothesis testing and auditing. The type of sampling methods ... Read Full Answer >>