Question

Describe a fictional example and generate a small data set in which data are heteroscedastic and you need to apply a GLS.

Answer 1

given that

Describe a fictional example and generate a small data set in which data are heteroscedastic and you need to apply a GLS.

one example is when the independent variable is the monthly income of a person in $ and the dependent variable is the expenses on food. we think that in general as the income of a person increases he tends to use more money on food expenses with significant variability. the following is illustrated via the plot shown below.

the R code

> set.seed(123)

> income<-seq(1000,10000,100)

> food_expense <- rnorm(n=91, mean=0.2*income, sd=0.4* income)

> plot(income,food_expense)

and here is the plot.