show all the steps please, thanks In the file Stockton.dat, we have data from Ja

Question

show all the steps please, thanks

In the file Stockton.dat, we have data from January 1991 to December 1996 on house prices, square footage and other characteristics of 4682 houses that were sold in Stockton, California. One of the key problems regarding housing prices in a region concerns construction of "house price indices". To illustrate, we estimate a regression model for house price, including as explanatory variables the size of the house (SQFT), the age of the house (AGE) and annual indicator variables, omitting the indicator variable for the year 1991. PRICE = beta_1 + beta_2SQFT + beta_3 AGE + beta_1 D92 + beta_2D93 + beta_3 D94 + beta_4 D95 + beta_5 D96 + e The results are as follows: a. Discuss the estimated coefficients on SQFT and AGE, including their interpretation, signs and statistical significance. b. Discuss the estimated coefficients on the indicator variables. c. What would have happened if we had included an indicator variable for 1991?

Explanation / Answer

Part a

The estimated coefficient for the variable SQFT is given as 71.7878, this value indicates a positive slope and it shows the positive relationship with the dependent variable price. The p-value associated with this coefficient is given as .00 which shows that the given coefficient is statistically significant. The estimated coefficient for the variable AGE is given as -179.4623, this value indicates a negative slope and it shows the negative relationship with the dependent variable price. The p-value associated with this coefficient is given as 0.00 which indicate that the given coefficient is statistically significant.

Part b

The p-values for the indicator variables D92 to D96 are very small and are approximately equal to zero. So, we can conclude that the given indicator variables are statistically significant and these indicator variables would be useful for the prediction of the dependent variable price.

Part c

If we had included the indicator variables for the year 1991, we would not get the unbiased estimator for the price because these indicator variables are based on the next years and which we would not be included for the prediction of the year 1991.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.