MS SAMEER (CMA*CA*CMDM*ast FUND MANAGER*LEGAL ADVISOR) (14938 Points)
15 July 2010
Homoskedastic Mean?
A statistics term indicating that the variance of the errors over the sample are similar. This type of error structure is most often assumed in statistics, but is not always the case when regression is done. If the variance of the errors around the line of best fit varies much, it will not show a pattern or
CA. Dashrath Maheshwari
(TaXpert)
(15103 Points)
Replied 15 July 2010
Homoskedastic is an adjective describing a statistical model in which the errors are drawn from the same distribution for all values of the independent variables.
This is a strong assumption, and includes in particular the assumption in a linear regression, for example,
y = Xb + e
that the variance of the e's is the same for all X's.
The observed variance will differ in almost any sample. But if one believes that the data-generating process does not in principle have greater variances for different values of the independent variable, one would describe the sample as homoskedastic anyway.
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