Phenotypic misclassification reduces substantially the power to detect association, particularly in case-control studies [1]–[6]. Typically these analyses were restricted to rates of misclassification on the order of 1–5%. However, it is conceivable that complex traits may be heterogeneous with respect to genetic susceptibility and disease pathophysiology, and that the effect of phenotypic or genetic heterogeneity (henceforth referred to as “heterogeneity”) is of a larger magnitude than that of phenotypic misclassification. This is particularly relevant for psychiatric disorders [7]. The diagnosis of mental illness is based primarily on descriptive clinical criteria and is typically made in absence of laboratory diagnostic tests or other clinically relevant knowledge of individual pathophysiology. It is possible that depression, psychosis, bipolar disorder (BD), or substance abuse each represent a common phenotypic manifestation of an underlying polygenic diathesis. But it is also conceivable that these syndromes encompass diverse conditions, each with a distinct genetic basis and little overlap with the others [8]. Several such subgroups of major psychiatric disorders, including lithium responsive BD [9] and mood incongruent psychosis [10] have been proposed based on clinical, familial and biological criteria.