Hi folks,

In trying to answer questions from some of my students, I did the following (using the data set “food.gdt” from Hill et al):

1) define x1 = 1/x

2) wls x1 y 0 x, save residuals uhat1

3) define ystar = y/sqrt(x), cstar = 1/sqrt(x), xstar = x/sqrt(x) (ie, wls “by hand”)

4) ols ystar cstar xstar, save residuals uhat2

(I actually used the gui, but replicated this with the console)

I was surprised  to find that uhat1 and uhat2 are different, even though the coefficient estimates are exactly the same. In fact, uhat2 = cstar*uhat1. Is this intended?

Thanks!

PS

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Dr. Peter Summers

Assistant Professor

Department of Economics

Texas Tech University

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