Questions / Quant research, Regression & linear algebra
Change the units of X
A regression with intercept is y = 2 + 3x + residual. You define z = 10x and represent the identical fitted function using z. What is the new slope?
Answer it in the app It's free. You get hints, a second try if you miss, and a follow-up question.
Show the answer and worked solution
Answer: 0.3 slope (3/10)
- Since x = z/10, the same fitted function is 2 + 0.3z.
Interview shortcut. Rescaling x by 10 divides its slope by 10.
In the app this has a follow-up where one thing about the setup changes. Try the follow-up.