Nonconstant variance and specification error: Generate 100 observations according to the following model: Y 10 1 X1 D2 X

Nonconstant variance and specification error: Generate 100 observations according to the following model:

Y ¼ 10 þ ð1 · XÞþð1 · DÞþð2 · X · DÞ þ ε

where ε ; Nð0; 102Þ; the values of X are 1; 2; ... ; 50; 1; 2; ... ; 50; the first 50 values of D are 0; and the last 50 values of D are 1. Then regress Y on X alone (i.e., omitting D and XD), Y ¼ A þ BX þ E. Plot the residuals E from this regression against the fitted values Yb. Is the variance of the residuals constant? How do you account for the pattern in the plot?