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Q#3: What is heteroscedasticity? Illustrate this by a suitable diagram. Suppose the error variance is a linear function of an explanatory variable X such that

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Q#3: What is heteroscedasticity? Illustrate this by a suitable diagram. Suppose the error variance is a linear function of an explanatory variable X such that E(u?) = 62X;. Explain how to transform the OLS dependent variable and regressors to correct for this problem. (06)

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