In order to remove the problem of heteroscedasticity, divide both sides of the linear model by explanatory variable inc
As indicated, the variance of error term is proportionate to the square of the explanatory variable - inc
Thus, the transformed model would be:
(beer/inc) = (b0/inc) + b1 + (b2/inc)price + (b3/inc)educ + (b4/inc)female + (u/inc)
Thus, with this transformed model, Var(u|inc, price, educ, female) = (sigma)^2, which means homoscedasticity.
2. (W 8.2] Consider a linear model to explain monthly beer consumption: beer = Bo +...
Consider the linear model to explain monthly beer consumption: beer = Bo + B, inc + B2 price + B3 educ + 34 female + u where E(ulinc, price, educ, female) = 0 and Var(uinc, price, educ, female) = o-inc. Answer the following questions. 1. What is heteroskedasticity? Explain. 2. Write the transformed model that has an homoskedastic error term. 3. Outline the intuition behind the BP and White tests for heteroskedasticity. 4. If we have dummy variables in our...
Please show the work thanks 6. Consider a linear model to explain monthly beer consumption: beer-A, + ßlinc + β2price + β3edu + β4female +11 E(u \ inc, price.educ, female)二0 Var(u \ inc, price , educ, female)-02 inc. Write the transformed equation that has a homosckedastic error term.
QUESTION 8 Consider a linear model to explain monthly beer consumption: beer = Bo + Biinc + B2price + B3educ + B4female + u, E(ulinc, price, educ, female) = 0 and Var(ulinc, price, educ, female) = o inc. Which of the following transformed equation has a homoscedastic error term? a. beer = Bo + B1inc + B2price + B3educ + B4female + u b.beer/inc= Bo(1/inc) + B1(1/inc) + B2(price/inc-) + B3(educ/inc?) + B4(female/inc?) + (u/inc) OC beer/inc = Bo(1/inc) +...
3. Consider the following model to explain monthly beer consumption: where E(ujincome, price, educ, female) -0 and Var(ulincome, price, educ, female) - ?"income. (a) What problems arise if OLS is used to estimate the model? (b) Write the transformed equation that has a homoskedastic error term.(4 Marks) (4 Marks)
First question:Second question: The model: Y4 = Bo + B2C+ + ut, t = 1,2,.....n, is an example of a(n): a) Autoregressive conditional heteroscedasticity model. b) static model. c) finite distributed lag model. d) infinite distributed lag model. Consider a linear model to explain monthly beer consumption: | Beer=Bo +Biinc +B2 price +B3educ +B4 female +u E(ulinc,price,educ, female) =0 Var(uſinc,price,educ, female) = o zinc?. Write the transformed equation that has a homoskedastic error term.
10. The following is the simple linear regression analysis output: E(Y) = Bo + B1 (ADV_X) The REG Procedure Model: MODELI Dependent Variable: SALES_T Analysis of Variance Sun of Mean Squares Square 4.90000 4.90000 1. 10000 0.36667 6.00000 Source Model Error Corrected Total F Value 13.36 Pr>F 0.0354 Root PSE Dependent Mean Coeff Var 0.60553 2.00000 30.27650 R-Square Ady A-se 0.8167 0.7556 Parameter Estimates Variable DF "estinato Value Pr > Itt 95% confidence Linite "Error .. 63503 0.19149 -0.10000 0.70000...
Consider the multiple regression with three independent variables under the classical linear model assumptions: y Bo+BBx,+B,x, +u 1. You would like to test the hypothesis: H0: B-3B, 1 What is the standard error of B-3B,? (i Write the t-statistic of B-3B ( Define 0,= B-3B.. Write a regression equation that allows you to directly obtain 0, and its standard error.
Problem 3 Consider the non-constant variance linear model Y, =Be + B111,1 + B,1,2 + ... + Bp-111.-1+€, (1) with G N(0,0?), i=1,..., 7. Define the reciprocal of the variance of as the weight w, and let w 0 0 W OW... 0... 02. We can estimate the non-constant variance model by minimizing the objective function w (9-Bo-Buca -.- Bp-111p-1) Task: Derive the weighted least squares equation (3) Bu = (XWX)-{XWY
QUESTION 1 Consider the following OLS regression line (or sample regression function): wage =-2.10+ 0.50 educ (1), where wage is hourly wage, measured in dollars, and educ years of formal education. According to (1), a person with no education has a predicted hourly wage of [wagehat] dollars. (NOTE: Write your answer in number format, with 2 decimal places of precision level; do not write your answer as a fraction. Add a leading minus sign symbol, a leading zero and trailing...