Testing Linear Restrictions and Functional Form Econometics PLEASE HELP! Solve a
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Testing Linear Restrictions and Functional Form Econometics PLEASE HELP! Solve all parts with showing work for a 5 star! Thank you. ONLY ANSWER IF CORRECT!!!! PLEASE... NEED TO LEARN HOW THIS WORKS. PLEASE CORRECT ANSWERS ONLY
3. Your friend is a real estate agent and she wants to come up with the best model for predicting house price, and asks for your help. Here is what she came up with so far Model 1: price Bo B1 sarft B2bdrms Babath BACA Balotsize u Model 2: price Bo B1 log(sgrft) Babdrms Babath BMCA B5 log(lotsize) u Model 3: price Bo B1 sarft B2bdrms B3bath, BACA Balotsize B6sgrft2 Brlot size2 u Model 4: price po B1 sgrft Babdrms Babath BMCA B5lotsize Bebdrms bath w Model 5: price po 81 sgrft B2bdrms B3bath -t- BACA B5lotsize Bebdrms sgrft u Where price is the price of a house (in thousands of sgrft is the size of a house (in sq ft), bdrms is the number of bedrooms, bath is the number of bathrooms, CA is a dummy variable equal to 1 if a house has a central air system, and 0 otherwise, and lot size is the size of the lot (in sq ft) (a) What sign do you expect to have in all of these models? Explain. (b) our friend real estate agent gave you the data for n 536 houses sold recently in her area. You used these data to estimate all five of her models, and here are R-squared (unadjusted that you've got: Model R2 0.591 0.618 0.620 0.605 0.611 Which model would you recommend your friend to use, and why?Explanation / Answer
a) A dummy independent variable which has a value of 0 will cause that variable's coefficient to have no role in influencing the dependent variable, while when the dummy takes on a value 1 its coefficient acts to alter the intercept. The minus sign is insignificant in this case.therfore there should be + sign for B4 in all models.
b) The unadjusted R-sqaured for model 3 which has the highest value is highly recomended which is able to explain significantly 62% of the variablity between independent and dependent variables.
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