Parametric tests assume that data are homoscedastic (have the same standard deviation in different groups). To learn how to check this and what to do if the data are heteroscedastic (have different st...Parametric tests assume that data are homoscedastic (have the same standard deviation in different groups). To learn how to check this and what to do if the data are heteroscedastic (have different standard deviations in different groups).
In this plot, the ordered residual (or observed quantiles) of the residuals are plotted aginst the expected quantiles assuming that \(\epsilon_i\)'s are approximately normal and independent with mean ...In this plot, the ordered residual (or observed quantiles) of the residuals are plotted aginst the expected quantiles assuming that \(\epsilon_i\)'s are approximately normal and independent with mean 0 and variance = MSE. Heteroscedasticity or unequal variance: the variance of the error \(\epsilon\)i may sometimes depend on the value of Xi. This is often true for financial data, where the volume of transactions usually has a role in the uncertainty of the market.
Residual analysis is the process of looking for signature patterns in the residuals that are indicative of a failure in the underlying assumptions of OLS regression. Different kinds of problems lead t...Residual analysis is the process of looking for signature patterns in the residuals that are indicative of a failure in the underlying assumptions of OLS regression. Different kinds of problems lead to different patterns in the residuals.
