Question: Consider the simple linear regression model y; = {30 + fhx; + E;. where the variance of E; is proportional to xl; that is, Var(t:;)

Consider the simple linear regression model y; = {30 + fhx; + E;. where the variance of E; is proportional to xl; that is, Var(t:;) = a 2 \la.

Suppose that we use the transformations y' = y/x and x' = I /x. Is this a variance-stabilizing transformation?

b. What are the relationships between the parameters in the original and transformed models?

c. Suppose we use the method of weighted least squares with U'; = I /x,2

. Is this equivalent to the transformation introduced in part a?

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