I came across an interview question that asks:
Compare 2 univariate regressions:
- $y = \beta'x + \epsilon$
- $\frac{y}{x} = \beta'x + \epsilon$.
In which setting do you expect to see a better fit (not looking for exact numbers but some mathematical intuition comparing the fit across both settings)?
I am not sure how to approach this question. Any help will go a long way.