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Unformatted text preview: y iˆ y i ) 2 ] ( np ) Weighted Least Square Recall: Y i = β + β 1 x i + σδ i ε i , σδ i ∝ w1 / 2 i r i = y i( ˆ β + ˆ β 1 x i ) behave like σδ i ε i ⇒ r 2 i behave like σ 2 δ 2 i ε 2 i ⇒ r 2 i δ 2 i behave like σ 2 ε 2 i Weighted Least Square Remark 1: Use WLS when the unequal variance is only problem. (heteroscedasticity: different variance) Remark 2: Give larger weight to the point with smaller variance As a result, one gets better efﬁciency in ˆ β and better power is testing. Remark3: Diagnostic plot should be performed on the “weighted residual”, w 1 / 2 i r i ....
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 Fall '11
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 Standard Deviation, Variance, Yi

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