Correct for heteroscedasticity

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Reference no: EM13891695

Table gives the level of gross fixed capital formation , sales X1, both in thousands of dollars, and a productivity index X2, for 35 firms in an industry. It is expected that will be directly related to both X1 and X2. Regress Y on X1 and X2 for (a) the entire sample, (b) the 14 observations with the smallest values of X2 and record ESS1, and (c) the 14 observations with the largest values of X2 and record ESS2. (d) Test for the presence of heteroscedasticity.

Table Gross Fixed Capital Formation, Sales, and Productivity in 35 Firms

Firm

1

2

3

4

5

6

7

8

9

10

11

12

Y

30.9

31.5

43.2

36.9

44.3

30.5

32.3

42.9

31.2

39.1

35.7

40.8

X1

135

150

300

225

310

105

170

285

145

250

205

275

X2

10.3

10.8

16.4

12.9

16.7

10.0

10.9

15.9

10.6

14.6

12.1

15.5

Firm

13

14

15

16

17

18

19

20

21

22

23

24

Y

31.2

42.1

32.8

36.3

37.4

30.5

33.4

37.4

44.9

33.4

45.2

30.2

X1

140

280

180

215

235

110

190

230

315

195

320

100

X2

10.5

15.6

10.9

12.5

13.8

10.0

11.1

13.1

17.1

11.3

17.3

9.9

Firm

25

26

27

28

29

30

31

32

33

34

35

 

Y

45.9

46.8

35.1

40.2

47.9

30.7

38.1

49.3

31.9

37.8

31.5

X1

330

345

200

260

350

120

250

355

165

245

150

X2

17.5

17.9

11.5

14.9

18.3

10.1

14.1

18.5

10.8

13.9

10.7

(a) Assuming that the error variance is proportional to X2 in Prob. 9.21, (a) correct for heteroscedasticity.

(a) What is the value of the new intercept and the slope coefficients associated with X1 and X2? How do they compare with the corresponding values before the transformation?

Reference no: EM13891695

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