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Regression Constant Variance - The Megaphone

This is particularly important for cross-sectional data.  If the residuals increase (decerase) with the independent variable, then your plot will take on a megaphone shape (Ra! Ra! Boom!).  This phenomenon is demonstrated in Figure (d).  As the values of the independent variable X increase (decrease), so do the values of the residual error term.  You should note that this trend could also occur in reverse.




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