{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

ps7-1 - k is the number of explanatory variables in the...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Problem set 7 Due on November 11 in class. Problem 1. Using the data on 104 apartments, you run 2 di ff erent re- gressions: a regression of rent on living space and # of bedrooms, and a regression of rent on living space, # of bedrooms, and a dummy for studios interacted with Living Space. The results of the regressions are given below: d Rent = 800 + 3 ( Living Space ) + 100 ( # of bedrooms ) , and d Rent = 600 + 3 ( Living Space ) + 80 ( # of bedrooms ) +4 ( Living Space ) ( Dummy for studios ) The sum of the squared residuals in the fi rst regression is 105 and in the second regression is 100. a) Interpret the coe cient on # of bedrooms in the fi rst regression (that is, describe its economic meaning) b) Interpret coe cient on ( Living Space ) ( Dummy for studios ) in the second regression c) Using the rule of thumb F-test (F-statistic is equal to ( SSR restricted SSR unrestricted ) /q SSR unrestricted / ( n k 1) , where q is the number of contraints in the null hypothesis relative to the al- ternative hypothesis and
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: k is the number of explanatory variables in the unrestricted regression), test a hypothesis that there is no systematic di f er-ence in the marginal e f ect of the Living Space on the Rent between studios and other apartments. Problem 2. You are given the following regression data d Expenditure = 300 (100) + 0 . 5 (0 . 4) ∗ Income − 100 (50) ∗ D + 0 . 3 (0 . 3) ∗ Income ∗ D where the standard errors of the OLS estimators are given in the parentheses 1 and D is a dummy variable equal to 1 if individual is African American and 0 otherwise. a) What is the economic interpretation of all the coe ffi cients in the above regression? b) Assuming that the OLS estimators of the coe ffi cients on Income and on Income ∗ D are independent, provide a 95% con f dence interval for a forecast of the increase in the expenditure of an African American, whose income has just increased by 100. 2...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern