Interept statistical significance of coefficient. What does it mean? Assignment
ID: 2932907 • Letter: I
Question
Interept statistical significance of coefficient. What does it mean? Assignment 5 omist collected data on housing prices from two similar neighborhoods. One of the neighborhoods econ from the university. bord ers a large state university while the other neighborhood is about three miles The data can be found here: utown.dta p://www.principlesofeconometrics.com/poe4/data/stata/utown.dta). price-is the price the house last sold at, in thousands of dollars ' sqft- is the number of square feet of living area, in houndreds. age-the age of the house. utown- a dichotomous variable where 1 corresponds to homes near the university and O otherwise * pool - a dichotomous variable where 1 corresponds to homes that have a pool and O otherwise · fplace-a dichotomous variable where 1 corresponds to homes that have a fireplace and 0 otherwise. . regress price sqft utown 1,000 3192.10 = 0.0000 0.8649 Adj R-squared = 0.8647 15.522 Number of obs F (2, 997) Source df MS Mode 1538226.51 Residual 240219.632 2 769113.255 Prob> F 997 240.942459 R-squared Total 1778446.14 999 1780.22637 Root MSE price Coef. Std. Err. t P>It! [95% Conf. Interval] 8.025361 8.685965 utown 6.36903 982695861.430.00 58.44064 62.29742 1.32 0.186 2.737905 14.09963 sqft 8.355663 .16832 49.64 0.000 cons 5.68086 4.290153
Explanation / Answer
Null Hypothesis H0: The coefficient of sqft is 0.
Alternative Hypothesis H1: The coefficient of sqft is not 0.
Test statistic, t = Observed Coefficient / Standard error
t = 8.355663 / 0.16832 = 49.64153
Degree of freedom = 997
P-value for t = 49.64153 and Df = 997 is, 0
As, P-value is less than the significance level (0.05), we reject the null hypothesis and conclude that there is significant evidence that the coefficient of sqft is not 0. This means that sqft is a significant variable in determining the housing prices.
Null Hypothesis H0: The coefficient of utown is 0.
Alternative Hypothesis H1: The coefficient of utown is not 0.
Test statistic, t = Observed Coefficient / Standard error
t = 60.36903 / 0.9826958 = 61.43206
Degree of freedom = 997
P-value for t = 61.43206 and Df = 997 is, 0
As, P-value is less than the significance level (0.05), we reject the null hypothesis and conclude that there is significant evidence that the coefficient of utown is not 0. This means that utown is a significant variable in determining the housing prices.
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