National open university of nigeria introduction to econometrics II eco 356

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Introduction to Econometrics ECO 356 Course Guide and Course Material
Introduction to Econometrics ECO 356 Course Guide and Course Material

INTRODUCTION TO ECONOMETRICS II

ECO 306

NOUN
102

Figure 1.2 Heteroscedasticity

Figure 1.3 Model with a heteroscedastic disturbance term
Figure shows how atypical scatter diagram would look if Y were an increasing function of X and the heteroscedasticity were of the type shown in Figure 1.2. It could be seen that, although the observations are not necessarily further away from the non- stochastic component of the relationship, represented by the line

, there is a tendency for their dispersion to increase as X increases. Thus this particular
Gauss–Markov condition does not seem to have been used anywhere in the analysis so

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