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An alternative method correcting BDR type of heteroskedasticity by the weighting re-estimated absolute residuals

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  • Reşit Çelik
  • Aydın Erar

Abstract

The aim of this paper is to introduce a new method which corrects residual variances for the butterfly distributed residuals (BDR). Distribution theory, confidence intervals, and tests of hypotheses are valid and meaningful only if the standard regression assumptions are satisfied. Heteroskedasticity is one of the violations of these assumptions and BDR is another type of heteroskedasticity. This study reveals an alternative approach to correct the BDR type of heteroskedasticity by the weighting re-estimated absolute residuals (WRAR). After giving brief information about heteroskedasticity and BDR type of heteroskedasticity, WRAR is introduced. WRAR and the usual variance stabilizing techniques are compared on multiple and simple regression models.

Suggested Citation

  • Reşit Çelik & Aydın Erar, 2017. "An alternative method correcting BDR type of heteroskedasticity by the weighting re-estimated absolute residuals," Communications in Statistics - Theory and Methods, Taylor & Francis Journals, vol. 46(23), pages 11514-11538, December.
    • Handle: RePEc:taf:lstaxx:v:46:y:2017:i:23:p:11514-11538
    DOI: 10.1080/03610926.2016.1271429
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