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(a) What is heteroscedasticity? Illustrate with a suitable diagram. (b) What are the consequences of heteroscedasticity when estimating a model using OLS? (0) Explain step
(a) What is heteroscedasticity? Illustrate with a suitable diagram. (b) What are the consequences of heteroscedasticity when estimating a model using OLS? (0) Explain step by step a formal test for the detection of heteroscedasticity. (d) Suppose the error variance is a linear function of the explanatory variable X such that E(U-i2) = (:2 Xi . Explain why the method of weighted least square regression is superior to OLS in this case
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