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Hetero­skedasticity

Heteroskedasticity is basically a fancy word for change in
It is a case in which there is variability in the degree to which a measurement varies around a
value. The diagrams below represent
s and demonstrate the difference between a variable with a constant variance (homoskedastic) and one with changing variance (heteroskedastic). Figure 2 is our heteroskedastic variable. Notice how the data points start to widen out as the variable increases from left to right – in the options world this would be referred to as an increase in
Figure 1 Figure 2

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