Solved – Chart indicates homoscedasticity but Breusch-Pagan test p<.001


I am writing my master's thesis and doing multiple regression analysis for hypotheses testing. I transformed the data using ln and use a sample with N = 15,000.
As a result of the assumption test, I got the following scatterplot.

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The scatter plot with standardized residual against studentized value is typical for homoscedasticity of residuals which is a triangular shape.

However, a Breusch-Pagan test shows a significance of 0.000 and thus rejects the null hypothesis of homoscedasticity. According to the test, it is heteroscedastic.

Should I still assume homoscedasticity and therefore interpret the results using robust standard errors and the HC3 method? I am using SPSS.

Best Answer

It is likely that a Breusch-Pagan test shows such a level of statistical significance (i.e. p < .001) because you have a relatively large sample size (N = 15,000). Visual inspection does indeed show a triangular pattern, indicating potential heteroskedasticity. From my experience, I would be more inclined to use the visual interpretation as it is more telling

Edit and further Clarification

  1. Given a relatively large sample size (N = 15,000) the Breusch-Pagan test may be sensitive to small deviations from homoscedasticity. This may explain p < .001 level of statistical significance

  2. The triangular shape of the residuals indeed warrants to consider heteroskedasticity

Note: Credit for clarification goes to @SalMangiafico for his input

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