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In the following model, Y = 0 + 1 X 1 + 2 X 2 + 3 X 3 + 4 X 4 + u suppose the error variance has the following structure:

  1. In the following model,


Y = β0 + β1 X1 + β2 X2 + β3 X3 + β4 X4 + u 


suppose the error variance has the following structure:

                  E(ui2) = σ2 X3i4reg

How would you transform the model so as to achieve homoskedastic error variance? How would you estimate the transformed model? List the various steps.

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