Using 50 observations, the following regression output is obtained from estimati

Question

Using 50 observations, the following regression output is obtained from estimating y = 0 + 1x + 2d1 + 3d2 + .

Interpret d1 and d2. (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.)

Are both dummy variables individually significant at the 5% level?

Using 50 observations, the following regression output is obtained from estimating y = 0 + 1x + 2d1 + 3d2 + .

Explanation / Answer

The regression equation is given by,y=-0.82+3.36*x-15.41*d1+8.28*d2

a)So,for x=312,d1=1,d2=0,y=-0.82+3.36*312-15.41=1032.09

For,x=312,d1=0,d2=1,y=-0.82+3.36*312+8.28=1055.78

b-1)Coefficients indicate change in response variable for one unit increase in the corresponding predictor,keeping other predictors constant.The sign indicates the direction. +ve indicated increase,while -ve increases decrease.

So,for d1=1,y will be less by 15.41 unit than for d1=0,for d2=1,y will be greater than 8.28 unit than for d2=0 .Hence,2nd and 3rd options are correct.

b-2) From the table,p-value of d1's coefficient is 0.3624>0.05 and of d2's coefficient is 0.0012<<0.05.So,according to rule,at 5% level of significance,we conclude that d1's coefficient is insignificant while d2's coefficient is significant.

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