Heteroskedasticity

A scatter chart plots regression residuals on the vertical axis against fitted values on the horizontal axis, with a horizontal reference line at zero. Instead of forming a uniform horizontal band, the scatter fans outward into a widening cone as fitted values increase — the visual signature of heteroskedasticity. This pattern shows that the error variance is not constant across observations, which makes OLS standard errors unreliable and invalidates conventional significance tests unless corrected.