Suppose that: Y = 1 + 5X + ϵ We multiply Y by 3 and X by 1/4 and compute a new regression model: find the values of β0, and β1.
Hi guys, I'm trying to solve this question my thinking leads me to solve the normal equation and calculate the new coefficents but i think my answer is wrong (with this it should be β0 = 1/3 and β1 = 5/12). Is there anyone that could help me and maybe explain me why I'm wrong? Thanks a lot
If $$Y = 1 + 5X + \epsilon$$ and $$Y' = 3Y$$ $$X' = 1/4 X$$ then $$Y'/3 = 1 + 5(4X') + \epsilon$$ so $$Y' = 3 + 60X' + 3\epsilon$$