What is 'Heteroskedasticity'
Heteroskedasticity, in statistics, is when the standard deviations of a variable, monitored over a specific amount of time, are nonconstant. Heteroskedasticity often arises in two forms, conditional and unconditional. Conditional heteroskedasticity identifies nonconstant volatility when future periods of high and low volatility cannot be identified. Unconditional heteroskedasticity is used when futures periods of high and low volatility can be identified.
BREAKING DOWN 'Heteroskedasticity'
In finance, conditional heteroskedasticity often is seen in the prices of stocks and bonds. The level of volatility of these equities cannot be predicted over any period of time. Unconditional heteroskedasticity can be used when discussing variables that have identifiable seasonal variability, such as electricity usage.

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