A variable transformation in a regression (e.g., replacing Y with log(Y)):
A)may reduce heteroscedasticity.
B)changes the model specification.
C)makes the model easier to interpret.
D)leads to severe autocorrelation.

Question

Quizplus · Accepted Answer

Variable transformation, such as using the log transformation of Y, may reduce heteroscedasticity by stabilizing the variance of the residuals. This can improve the accuracy and reliability of the regression model. The other options are not necessarily true for all cases of variable transformation.

A Variable Transformation in a Regression (E