Consider the following models: Model I: Y i = 1 + 2 X i +
Question:
Consider the following models:
Model I: Yi = β1 + β2Xi + ui
Model II: Y*i α1 + α2X∗i + ui
where Y* and X* are standardized variables. Show that α̂2 = β̂2(Sx/Sy ) and hence establish that although the regression slope coefficients are independent of the change of origin they are not independent of the change of scale.
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