Research in Practice: How to correct for heteroscedasticity in stata

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3.5.11

How to correct for heteroscedasticity in stata

Heteroscedasticity = the situation in which variance of residuals is not homogenous. It changes across groups, waves of data.

The assumption that variance of residuals is homogenous is often made in regression analysis. However, this assumption needs to be checked. If you are not sure about it, you can use option  'robust' or 'hc3' after 'reg' in Stata.

How to do?
1) small sample: use robust option in reg (stata)
reg DEPVAR ListofPredictor, robust
2) large sample: use hc3 option in reg (stata)
reg DEPVAR listofPredictor, hc3
Read here: http://www.sociology.ohio-state.edu/ptv/faq/heteroscedasticity.htm

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