Question: in example 8.7, we computed the OLS and a set of WLS estimate in a cigarette demand equation. C9 In Example 8.7, we computed the

in example 8.7, we computed the OLS and a set of WLS estimate in a cigarette demand equation.

C9 In Example 8.7, we computed the OLS and a set of WLS estimates in a cigarette demand equation. (i) Obtain the OLS estimates in equation (8.35). (ii) Obtain the h; used in the WLS estimation of equation (8.36) and reproduce equation (8.36). From this equation, obtain the unweighted residuals and fitted values; call these u; and y;, respectively. (For example, in Stata , the unweighted residuals and fitted values are given by default.) (iii) Let u; = u;/ Vh; and y; = y/ Vh; be the weighted quantities. Carry out the special case of the White test for heteroskedasticity by regressing u; on y;, yi, being sure to include an intercept, as always. Do you find heteroskedasticity in the weighted residuals

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