dse 2013 question 48 econometrics

[football fan]

shouldnt the answer be (d).......gujrati page 169
please help.

[Dreyfus]

Refer this post http://discussion-forum.2150183.n2.nabble.com/Regression-On-Standardized-Variable-td7591866.html#a7592897

[Granpa Simpson]

Let log P=P' and log X=X'
Now the equation can be written as, X'=α+β*P'+Є,
Now when P is divided by 1000,
P'=log(P/1000),
P'=log P-3*log10,
or, P'+3=lopP.
Now put it in the equation and the new equation becomes
X'=α'+β'*(P'+3)+Є
Now β'={Cov(P'+3, X')/Var(P'+3)}...................................(1)
Now Cov(P'+3,X')=Cov(P',X')
and Var(P'+3)=Var(P') (since variance is independent of change in origin)
So β'=Cov(P',X')/Var(P')=β.
Thus the slope parameter remains same. Similarly you can check that the intercept term will change..!!!

[football fan]

thank you allen.....:)