Homoskedasticity (also spelled as Homoscedasticity), or constant variance of regression error terms, is a key assumption of ordinary least squares (OLS) regression. When this assumption is violated, i.e. the errors are heteroskedastic (or heteroscedastic), the regression estimator is unbiased and consistent. However, it is less efficient and this leads to Type I error inflation or reduced statistical power for coefficient hypothesis tests.

Thus correcting for heteroskedasticity is necessary while conducting OLS. There are methods for this, which include transforming the data, use of weighted least squares (WLS) regression and generalized least squares (GLS) estimation. Another alternative is to use heteroskedasticity-consistent standard error (HCSE) estimators of OLS parameter estimates (White, 1980).

HCSE are of four types. Standard errors from HC0 (the most common implementation) are best used for large sample sizes as these estimators are downward biased for small sample sizes. HC1, HC2, and HC3 estimators are better used for smaller samples.

Many researchers conduct their statistical analysis in STATA, which has in-built procedures for estimating standard errors using all of the HC methods. However, others use SPSS due to its pair-wise deletion capability (versus list-wise deletion in STATA) and suffer from its lack of heteroskedasticity correction capabilities. This wonderful paper by Hayes and Cai, provides a macro (in the Appendix) that can implement HCSE estimators in SPSS. They also provide a similar macro for SAS.

Note that the macro has no error-handling procedures, hence pre-screening of the data is required. Also, missing data is handled by list-wise deletion (which might defeat the purpose of using SPSS for some users).

Another link to the paper is here.

References

Hayes, A.F. and Cai, L. (2007) , “Using heteroskedasticity-consistent standard error estimators in OLS regression: An introduction and software implementation”, Behavior Research Methods, 39 – 4, 709-722, DOI: 10.3758/BF03192961.

White, H. (1980), “A Heteroscedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroscedasticity,” Econometrica, 48, 817-838.