Question
It has been determined that the varying variance in the I = b 0 + b 1 Y + u shaped linear investment function is
It has been determined that the varying variance in the I = b0+ b1Y + u shaped linear investment function is in E(u2) = 2Y2form. According to this,
a) Convert the investment function to such that the error term has constant variance.
b)Construct the least squares estimator b =(X'X)-1X'Y for the transformed relationship using normal equations.
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Quantitative Methods for Business
Authors: David R. Anderson, Dennis J. Sweeney, Thomas A. Williams, Jeffrey D. Camm, James J. Cochran
13th edition
1285866312, 978-0357685648, 978-1285866314
