MTH-416, REGRESSION ANALYSIS Lecture Notes - Lecture 19: Harvey Phillips, Indian Institute Of Technology Kanpur, Dorian M. Goldfeld
6 Apr 2023
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In another example, suppose in a simple linear regression model, x denotes the number of hours of practice for typing and y denotes the number of typing errors per page. It is expected that the number of typing mistakes per page decreases as the person practices more. The homoskedastic disturbances assumption implies that the number of errors per page will remain the same irrespective of the number of hours of typing practice which may not be true in practice. There are various reasons due to which the heteroskedasticity is introduced in the data. Some of them are as follows: the nature of the phenomenon under study may have an increasing or decreasing trend. For example, the variation in consumption pattern on food increases as income increases. Similarly, the number of typing mistakes decreases as the number of hours of typing practise increases: sometimes the observations are in the form of averages, and this introduces the heteroskedasticity in the model.
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