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Conditional Heteroskedasticity (WEDC)

October 13, 2015

What is it?

Residual variance related to level of independent variables

Effect?

Coefficients are consistent. Standard errors are underestimated. Too many Type I errors.

Detection?

Breusch-Pagan chi-sqaure test = n x R^2

Correction?

Use White-corrected standard errors

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From → Quant

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