Heteroskedastic

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.

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
  1. Homoskedastic

    A statistics term indicating that the variance of the errors ...
  2. Heteroskedasticity

    In statistics, when the standard deviations of a variable, monitored ...
  3. Error Term

    A variable in a statistical and/or mathematical model, which ...
  4. Standard Error

    The standard deviation of the sampling distribution of a statistic. ...
  5. Non-Sampling Error

    A statistical error caused by human error to which a specific ...
  6. Regression

    A statistical measure that attempts to determine the strength ...
Related Articles
  1. Economics

    Understanding Regression

    Regression is a statistical analysis that attempts to predict the effect of one or more variables on another variable.
  2. Fundamental Analysis

    Explaining Standard Error

    Standard error is a statistical term that measures the accuracy with which a sample represents a population.
  3. Professionals

    Regression Analysis

    CFA Level 1 - Regression Analysis
  4. Economics

    Understanding Statistics

    Statistics provide the means to analyze data and then summarize it into a numerical form.
  5. Professionals

    Sampling and Estimation

    CFA Level 1 - Sampling and Estimation- sampling error, in depth information on confidence intervals and t-distributions
  6. Investing News

    3 Reasons Tracking Error Matters

    Discover three ways investors can use tracking error to measure performance for a mutual fund or ETF, whether indexed or actively managed.
  7. Trading Systems & Software

    Trading Systems Coding: Testing, Troubleshooting and Optimizing

    By Justin Kuepper Contact Justin Now that you have a trading system designed and coded, it is time to test it to make sure that your coding is free of logical and technical errors. We will also ...
  8. Fundamental Analysis

    How Does Sampling Work?

    Sampling is a term used in statistics that describes methods of selecting a pre-defined representative number of data from a larger data population.
  9. Fundamental Analysis

    Understanding the Simple Random Sample

    A simple random sample is a subset of a statistical population in which each member of the subset has an equal probability of being chosen.
  10. Professionals

    Interpreting Statistical Results

    CFA Level 1 - Test Statistics and Interpreting Results
RELATED FAQS
  1. What is a relative standard error?

    Find out how to distinguish between mean, standard deviation, standard error and relative standard error in statistical survey ... Read Answer >>
  2. How is the standard error used in trading?

    Understand how the standard error is used in statistics and what it measures. Learn how the standard error is used in trading ... Read Answer >>
  3. What is the difference between linear regression and multiple regression?

    Learn the difference between linear regression and multiple regression and how multiple regression encompasses not only linear ... Read Answer >>
  4. What are some of the more common types of regressions investors can use?

    Learn about the most common types of regressions investors use to model asset prices including linear regressions and multiple ... Read Answer >>
  5. What variables are most important when making a prediction through sensitivity analysis?

    Explore sensitivity analysis and how this method considers different variables to determine a course of action based on statistical ... Read Answer >>
  6. How do I calculate the standard error using Matlab?

    Learn how to calculate the standard error for a sample statistical measure, such as the sample mean, using standard Matlab ... Read Answer >>
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  4. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center