Professional Documents
Culture Documents
Y = β0 + β1 X + ε
the model
Y = β0 + β1 X α + ε
would provide a better fit to the data, the appropriate value of α needs to be obtained.
If the model
Y = β0 + β1 X + ηX ln X + ε
is fitted and the parameter η is non–zero, α can be estimated by
η̂
α= +1
β̂1
where β1 is estimated from the original model and η is estimated from the transformed
model. If an estimate of zero is obtained for α, the appropriate transformation is to
take X α as ln X.
5.1
SIMPLE LINEAR REGRESSION Transforming the response variable
Y = β0 + β1 X + ε
the model
Y λ = β0 + β1 X + ε
would provide a better fit to the data, the appropriate value of λ needs to be obtained.
If the model
Y = β0 + β1 X + φG + ε
is fitted and the parameter φ is non–zero, λ can be estimated by
λ̂ = 1 − φ̂.
5.2