Heteroscedasticity - Deepstash

# Heteroscedasticity

In order to prevent Heteroscedasticity, we need to

• Look for Omitted Variable Bias.
• Look for Outliers.
• Apply log Transformation.

2

MORE IDEAS ON THIS

### 1. Linearity

• A Linear Regression is Linear because the Equation is Linear.
• To verify the Linearity between Independent and Dependent Variable apply Scatter plot.
• If the Data points form a pattern that looks like a Straight Line then Linear Regression is Suitable.

2

### What is Ordinary Least Square Method?

Ordinary least squares, or linear least squares, estimates the parameters in a regression model by minimizing the sum of the squared residuals.

2

### Autocorrelation Detection

To detect autocorrelation

• Plot all points and check for patterns or
• Use Durbin - Watson test.

There is no remedy for Autocorrelation. Instead of linear regression, we can use

• Autoregressive Models.
• Moving Average Models.

2

### Assumptions for OLS

OLS Assumptions are the Conditions that we need to consider them before performing Regression Analysis.

Some OLS Assumptions are:

1. Linearity
2. No Endogeneity
3. Normality
4. Zero Mean of Error Terms
5. Homoscedasticity

2

### 6. No Autocorrelation

• Autocorrelation is a mathematical representation of the degree of similarity between a given time series and a lagged version of itself over successive time intervals.
• It is similar to the Correlation between two different Time Series but Autocorrela...

2

### Non-Linear Pattern

If the pattern doesn't looks like a Straight Line, then we need to apply

• A Non Linear Regression or
• Exponential Transformation or
• Log Transformation.

2

### 2. No Endogeneity

• Technically, Endogeneity occurs when a predictor variable (x) in a regression model is correlated with the error term (e) in the model.
• This usually occurs due to the Omitted Variable Bias (when we forget to include a releva...

2

### 3. Normality of Error Terms

• We need to consider that our Error Term is normally distributed.
• We only need Normal Distribution while making Statistical Inferences.
• T-tests and F-tests work because we have assumed normality.
• If Error Term isn't normally distribute...

2

### 4. Zero Mean of Error Terms

• If the Mean of the Error Terms is not expected to be zero then the line is not the Best fitting one.
• Having an Intercept Solves the problem.

2

### 5. Homoscedasticity

• Homoscedasticity means to have “Equal Variance”. The error terms should have equal variance with one another.
• When the error terms don’t have “Equal Variance”, then Heteroscedasticity happens.

2

### Fixing Multicollinearity

To fix Multicollinearity:

• If the Dataset is small, we can drop one independent variable. Or we can Transform them into One Variable (Eg. Average of two Variables)
• If the Dataset is large, we will use Ridge and Lasso Regression.

2

### 7. No Multicollinearity

• We observe Multicollinearity when two or more Independent Variables in a model are “Highly Correlated”.
• Correlation could be Positive (or) Negative.
• This will lead result in less reliable predictions.
• Multicollineari...

2

CURATED FROM

CURATED BY

Enthusiastic with a Splash of craziness

These are some of the Assumptions to be pondered while Applying Ordinary Least Square Method and Performing Regression Analysis.

## MORE LIKE THIS

### Why Certain Countries Have Visa Restrictions

Countries have visa restrictions in order to check and control the flow of visitors in and out of the country and to prevent illegal immigration and other criminal activities. Forcing travelers to apply for a visa allows the authorities to vet potential visitors.

For e...

### How to Reduce Unconscious Bias

• Recognise that the unconscious bias is a systemic issue. Internal cultures need to be checked and addressed first.
• There is no shame or guilt in unconscious bias. Unconscious bias stems from our tendency to categorise people into social groups and often d...

“To discern what is truly essential we need space to think, time to look and listen, permission to play, wisdom to sleep, and the discipline to apply highly selective criteria to the choices we make.”

## Explore the World’sBest Ideas

### 200,000+ ideas on pretty much any topic. Created by the smartest people around & well-organized so you can explore at will.

#### An Idea for Everything

Explore the biggest library of insights. And we've infused it with powerful filtering tools so you can easily find what you need.

Knowledge Library

#### Powerful Saving & Organizational Tools

Save ideas for later reading, for personalized stashes, or for remembering it later.

# Personal Growth

### Organize your ideas & listen on the go. And with Pro, there are no limits.

#### Listen on the go

Just press play and we take care of the words.

#### Never worry about spotty connections

No Internet access? No problem. Within the mobile app, all your ideas are available, even when offline.

#### Get Organized with Stashes

Ideas for your next work project? Quotes that inspire you? Put them in the right place so you never lose them.

My Stashes

Join

2 Million Stashers

4.8

Stars

5,740 Reviews

App Store

4.7

Stars

72,690 Reviews

Sean Green

Great interesting short snippets of informative articles. Highly recommended to anyone who loves information and lacks patience.

Ashley Anthony

This app is LOADED with RELEVANT, HELPFUL, AND EDUCATIONAL material. It is creatively intellectual, yet minimal enough to not overstimulate and create a learning block. I am exceptionally impressed with this app!

Best app ever! You heard it right. This app has helped me get back on my quest to get things done while equipping myself with knowledge everyday.

samz905

Don’t look further if you love learning new things. A refreshing concept that provides quick ideas for busy thought leaders.

Jamyson Haug

Great for quick bits of information and interesting ideas around whatever topics you are interested in. Visually, it looks great as well.

Ghazala Begum

Even five minutes a day will improve your thinking. I've come across new ideas and learnt to improve existing ways to become more motivated, confident and happier.

Giovanna Scalzone

Brilliant. It feels fresh and encouraging. So many interesting pieces of information that are just enough to absorb and apply. So happy I found this.

Laetitia Berton

I have only been using it for a few days now, but I have found answers to questions I had never consciously formulated, or to problems I face everyday at work or at home. I wish I had found this earlier, highly recommended!

20x Faster

without
deepstash

with
deepstash

with

deepstash

Unlimited idea saving & library

Unlimited history

Unlimited listening to ideas