Otabek

I've already passed all the CFA exams so good luck making me find that in a CFA textbook :-P

Where variances are not constant would be with GARCH models which is caused by volatility clustering. We use GARCH models to generalize and make a more accurate variance estimate since market volatility and correlations rise significantly during times of stress. Assuming a constant variance can lead you to underestimate risk during volatile markets and overestimate risk during stable markets.