Unit 5 ECON16 (assignment answer key)

# C conduct a four step hypothesis test for the problem

• Homework Help
• 10
• 100% (4) 4 out of 4 people found this document helpful

This preview shows page 2 - 6 out of 10 pages.

(c) Conduct a four-step hypothesis test for the problem in textbook question (ii). (“Dropping educ and age from the equation gives …”) p. 162 (F-test) 2

Subscribe to view the full document.

Step #1 Ho : β educ = 0, β age = 0 Ha : at least one≠ 0 Step #2 This hypothesis test is based on the F- distribution with 2, 702 degrees of freedom. α = 0.05 Reject the Ho if the F-test stat > 3.01 and p- value < 0.05. EXCEL command for the critical value: =F.INV.RT(0.05,2,702) Step #3 Looking at the data for this question (see p. 150): F = ( 0.113 0.103 )/ 2 ( 1 0.113 ) / 702 = 3.957 p-value = 0.020 Note the p-value was found in EXCEL using the command: =F.DIST.RT(3.957,2,702) Step #4 Since 3.958 > 3.01 AND 0.020< 0.05 Reject the Ho. At least one of these coefficients is not equal to 0. 3

Subscribe to view the full document.

ln ( price ) = β 0 + β 1 ( sqrft ) + ( θ 1 150 β 1 ) ( bdrms ) + u Then re-arrange: ln ( price ) = β 0 + β 1 ( sqrft 150 bdrms ) + θ 1 ( bdrms ) + u (iii) To estimate this model in STATA, you must first create a new X-regressor, new = sqrft – 150*bdrms in STATA . generate new = sqrft-150*bdrms and estimate the model: ^ ln ( price )= 4.766 + 0.0875 ( new ) + 0.000379 ( bdrms ) Note that the estimate is the same as found above, 0.0875, but now from STATA you also have a

{[ snackBarMessage ]}

### What students are saying

• 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.

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

• 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.

Dana University of Pennsylvania ‘17, Course Hero Intern

• 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.

Jill Tulane University ‘16, Course Hero Intern