- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 10. Simple Linear Regression
- Subject 2. Assumptions of the Simple Linear Regression Model

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**CFA Practice Question**

The homoscedasticity assumption of linear regression model means:

II. The standard deviation of the residuals is equal for all levels of X.

III. The expected value of all residuals is zero.

I. The variance of the residuals is the same for all observations.

II. The standard deviation of the residuals is equal for all levels of X.

III. The expected value of all residuals is zero.

A. I only

B. I and II

C. III only

**Explanation:**Homoscedasticity describes a situation in which the error term (that is, the “noise” or random disturbance in the relationship between the independent variables and the dependent variable) is the same across all values of the independent variables.

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