Heteroskedastic

AAA

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.

RELATED TERMS
  1. Line Of Best Fit

    A straight line drawn through the center of a group of data points ...
  2. Poisson Distribution

    A statistical distribution showing the frequency probability ...
  3. Sampling Error

    A statistical error to which an analyst exposes a model simply ...
  4. Autocorrelation

    A mathematical representation of the degree of similarity between ...
  5. Regression

    A statistical measure that attempts to determine the strength ...
  6. Homoskedastic

    A statistics term indicating that the variance of the errors ...
RELATED FAQS
  1. How do you calculate the geometric mean to assess portfolio performance?

    The geometric mean is used to calculate the central tendency of a set of numbers. It is the average of the logarithmic values ... Read Full Answer >>
  2. What is the difference between a simple random sample and a stratified random sample?

    Simple random samples and stratified random samples differ in how the sample is drawn from the overall population of data. ... Read Full Answer >>
  3. What are the advantages and disadvantages of using systematic sampling?

    As a statistical sampling method, systematic sampling is simpler and more straightforward than random sampling. It can also ... Read Full Answer >>
  4. What is the difference between the standard error of means and standard deviation?

    The standard deviation, or SD, measures the amount of variability or dispersion for a subject set of data from the mean, ... Read Full Answer >>
  5. What level of correlation among investments will guarantee market returns but have ...

    The efficient frontier set forth by modern portfolio theory (MPT) can provide an estimate of an optimal portfolio that allows ... Read Full Answer >>
  6. What is a "non linear" exposure in Value at Risk (VaR)?

    The value at risk (VaR) is a statistical risk management technique that determines the amount of financial risk associated ... Read Full Answer >>
Related Articles
  1. Budgeting

    The P/E Ratio: A Good Market-Timing Indicator

    Check out the returns this newer technical analysis tool would've yielded over the period from 1920 to 2003.
  2. Technical Indicators

    The Gann Studies

    Learn why this pioneer of technical analysis believed it's possible to predict the future.
  3. Fundamental Analysis

    What is Quantitative Analysis?

    Quantitative analysis refers to the use of mathematical computations to analyze markets and investments.
  4. 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.
  5. Economics

    What is Systematic Sampling?

    Systematic sampling is similar to random sampling, but it uses a pattern for the selection of the sample.
  6. Fundamental Analysis

    Explaining Expected Return

    The expected return is a tool used to determine whether or not an investment has a positive or negative average net outcome.
  7. Fundamental Analysis

    Explaining the Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio.
  8. Investing

    The Labor Market Recovery’s Missing Ingredient

    Job creation is running at the fastest pace since the 90s, and there is some evidence that wage growth is finally starting to accelerate, albeit modestly.
  9. Trading Strategies

    Best Undergraduate Degrees For Day Traders

    We look at some popular undergrad majors for those wanting to begin a career in the exciting world of fast-paced trading.
  10. Fundamental Analysis

    Explaining Standard Error

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

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center