Solved

A Realtor Wants to Predict and Compare the Prices of Homes

Question 38

Essay

A realtor wants to predict and compare the prices of homes in three neighboring locations.She considers the following linear models:
Model A: Price = β0 + β1Size + β2Age + ε
Model B: Price = β0 + β1 Size + β3 Loc1 + β4 Loc2 + ε
Model C: Price = β0 + β1Size + β2Age + β3 Loc1 + β4 Loc2 +ε
where,
Price = the price of a home (in $1,000s)
Size = the square footage (in sq.feet)
Loc1 = a dummy variable taking on 1 for Location 1,and 0 otherwise
Loc2 = a dummy variable taking on 1 for Location 2,and 0 otherwise
After collecting data on 52 sales and applying regression,her findings were summarized in the following table. A realtor wants to predict and compare the prices of homes in three neighboring locations.She considers the following linear models: Model A: Price = β<sub>0</sub> + β<sub>1</sub>Size + β<sub>2</sub>Age + ε Model B: Price = β<sub>0</sub> + β<sub>1</sub> Size + β<sub>3</sub> Loc1 + β<sub>4</sub> Loc2 + ε Model C: Price = β<sub>0</sub> + β<sub>1</sub>Size + β<sub>2</sub>Age + β<sub>3</sub> Loc1 + β<sub>4</sub> Loc2 +ε where, Price = the price of a home (in $1,000s) Size = the square footage (in sq.feet) Loc1 = a dummy variable taking on 1 for Location 1,and 0 otherwise Loc2 = a dummy variable taking on 1 for Location 2,and 0 otherwise After collecting data on 52 sales and applying regression,her findings were summarized in the following table. Note: The values of relevant test statistics are shown in parentheses below the estimated coefficients. Using Model C,define the null hypothesis for testing the joint significance of the two dummy variables? Note: The values of relevant test statistics are shown in parentheses below the estimated coefficients.
Using Model C,define the null hypothesis for testing the joint significance of the two dummy variables?

Correct Answer:

verifed

Verified

For the considered regression model with...

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Q15: The logit model cannot be estimated with

Q16: The model y = β<sub>0</sub> + β<sub>1</sub>x

Q34: According to the Center for Disease Control

Q35: A bank manager is interested in assigning

Q37: A realtor wants to predict and compare

Q40: Consider the following regression model, Humidity =

Q41: According to the Center for Disease Control

Q71: Suppose that we have a qualitative variable

Q93: A dummy variable is a variable that

Q101: A model formulated as y = β<sub>0</sub>