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Basic Question 4 of 5
When we ignore heteroskedasticity, we tend to
B. find no significant relationships when there is one.
C. find no significant relationships when there is none.
A. find significant relationships when there is none.
B. find no significant relationships when there is one.
C. find no significant relationships when there is none.
User Contributed Comments 2
| User | Comment |
|---|---|
| nsmwaura | Type 1 error...reject the null hypothesis while its true |
| quanttrader | heteroskedasticity implies more distrib amongst the error term -- ie std error increases, hence t value will increase causing us to reject the null when it may indeed be true (ie type 1 error-- falsely assuming a sign relationship) |
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Tamara Schultz
Learning Outcome Statements
explain the types of heteroskedasticity and how it affects statistical inference;
CFA® 2025 Level II Curriculum, Volume 1, Module 3.