ECONOMETRICS ASSIGNMENT Qs) 9) Basically 3 determinants: Bedrooms, Lot size , covered area

Date: 05/10/13 Time: 09:42 Sample: 1 88 PRICE Mean Median Maximum Minimum Std. Dev. Skewness Kurtosis Jarque-Bera Probability Sum Sum Sq. Dev. 293546.0 265500.0 725000.0 111000.0 102713.4 1.998857 8.393914 165.2787 0.000000 25832051 9.18E+11 COVER 2013.693 1845.000 3880.000 1171.000 577.1916 1.383878 4.724510 38.99281 0.000000 177205.0 28984061

Observations

88

88

LOG-LOG model shows that scatter is more evenly distributed

CORRELATION OF LP and LCOV = 74.3% COR OF LP and Cover =76.4% Cor p and cover= 78.79% Cor p and LCOVEr= 75.03%

Dependent Variable: PRICE Method: Least Squares Date: 05/10/13 Time: 12:49 Sample: 1 88 Included observations: 88 Variable C COVER R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Coefficient 11204.14 140.2110 0.620797 0.616387 63617.08 3.48E+11 -1097.191 140.7913 0.000000 Std. Error 24742.61 11.81664 t-Statistic 0.452828 11.86555 Prob. 0.6518 0.0000 293546.0 102713.4 24.98162 25.03792 25.00430 1.728723

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

Equation P= 11204 + 140.2110Cover Interpretation of Slope For a 1 SQFT increase in cover area, the price increases by $140.211 on average.

Dependent Variable: PRICE Method: Least Squares Date: 05/10/13 Time: 12:51 Sample: 1 88 Included observations: 88 Variable C LCOVER R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Coefficient -1962420. 297911.3 0.562954 0.557872 68296.95 4.01E+11 -1103.438 110.7756 0.000000 Std. Error 214467.2 28305.11 t-Statistic -9.150211 10.52500 Prob. 0.0000 0.0000 293546.0 102713.4 25.12358 25.17989 25.14627 1.825737

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

Equation P= -1962420 + 297911.3LCOVER Interpretation For a 1% increase in cover area, price increases by $2979.113 on average.

Dependent Variable: LPRICE Method: Least Squares Date: 05/10/13 Time: 12:50 Sample: 1 88 Included observations: 88 Variable COVER C R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Coefficient 0.000402 11.73178 0.583696 0.578855 0.197006 3.337761 19.10302 120.5798 0.000000 Std. Error 3.66E-05 0.076621 t-Statistic 10.98088 153.1137 Prob. 0.0000 0.0000 12.54094 0.303573 -0.388705 -0.332402 -0.366022 1.712908

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

Equation LPRICE = 11.73178 + 0.000402COVER Interpretation For a 1 SQFT increase in area, the price increases by 0.0402% on average.

Dependent Variable: LPRICE Method: Least Squares Date: 05/10/13 Time: 12:52 Sample: 1 88 Included observations: 88 Variable C LCOVER R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Coefficient 5.932625 0.872660 0.552991 0.547793 0.204142 3.583943 15.97183 106.3898 0.000000 Std. Error 0.641049 0.084605 t-Statistic 9.254565 10.31454 Prob. 0.0000 0.0000 12.54094 0.303573 -0.317541 -0.261238 -0.294858 1.792377

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

Equation LPRICE = 5.932625 + 0.872660LCOVER Interpretation For a 1% increase in cover area, the price increases by 0.87266% on average.

Multiple Regression

Dependent Variable: PRICE Method: Least Squares Date: 05/10/13 Time: 13:26 Sample: 1 88 Included observations: 88 Variable C LOTSIZE COVER BDRMS R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Coefficient -21770.31 2.067707 122.7782 13852.52 0.672362 0.660661 59833.48 3.01E+11 -1090.760 57.46023 0.000000 Std. Error 29475.04 0.642126 13.23741 9010.145 t-Statistic -0.738601 3.220096 9.275093 1.537436 Prob. 0.4622 0.0018 0.0000 0.1279 293546.0 102713.4 24.88091 24.99351 24.92627 2.109796

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

Equation PRICE = -21770.31 + 2.067707LOTSIZE + 122.7782CO VER + 13852.52BDRMS Interpretation of Coefficient of LOTSIZE For a 1 SQFT increase in LOTSIZE, the price will increase by $2.067707 on average, holding COVER and BDRMS constant. Interpretation of Coefficient of COVER For a 1 SQFT increase in COVER, the price will increase by $122.7782 on average, holding LOTSIZE and BDRMS constant. Interpretation of Coefficient of BDRMS For a 1 SQFT increase in BDRMS, the price will increase by $13852.52 on average, holding COVER and LOTSIZE constant.

Dependent Variable: LPRICE Method: Least Squares Date: 05/10/13 Time: 13:29 Sample: 1 88 Included observations: 88 Variable C LLOTSIZE LCOVER LBD R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Coefficient 5.478938 0.169537 0.716869 0.099245 0.639370 0.626490 0.185530 2.891391 25.41976 49.64183 0.000000 Std. Error 0.640027 0.038488 0.093455 0.102006 t-Statistic 8.560484 4.404974 7.670777 0.972936 Prob. 0.0000 0.0000 0.0000 0.3334 12.54094 0.303573 -0.486813 -0.374207 -0.441447 2.055650

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

Equation LPRICE = 5.478938 + 0.169537LLOTSIZE + 0.716869LCOVER + 0.099245LBDRM Interpretation of Coefficient of LLOTSIZE For a 1% increase in LOTSIZE, price increases by 0.169537% on average, holding LCOVER AND LBDRM constant. Interpretation of Coefficient of LCOVER For a 1% increase in LCOVER, price increases by0.716869% on average, holding LLOTSIZE AND LBDRM constant. Interpretation of Coefficient of LBDRM For a 1% increase in LBDRM, price increases by0.099245% on average, holding LCOVER AND LLOTSIZE constant.

The first model is more suitably fit as it has a higher explained variation

2.067707- 0 / 0.642126 =

THREE HYPOTHESES

1) As lot size increases, the selling price of the house also increases B1 > 0 Null Hypothesis : B1 = 0 Alternative Hypothesis: B1 =/ 0 Tc = b1 B1/se(b1) Tc = 0.169537/0.038488
Tc = 4.404974

d.f. = 88 4 = 84 Level of Significance = 0.025 T(Tab) = 1.960 Tc > T(tab) = 4.4>1.96 Hence, we reject the null hypothesis and have sufficient evidence to conclude that there is a significant relationship between the lot size and the selling price of the house. Thus, as the lot size increases, selling price of the house increases

2) As Cover size increase, House price also increases B2 > 0 Null Hypothesis : B2 = 0 Alternative Hypothesis: B2 =/ 0 Tc = b2 B2/se(b2) Tc = 0.716869/0.093455
Tc = 7.670777

d.f. = 88 4 = 84 Level of Significance = 0.025

T(Tab) = 1.960 Tc > T(tab) = 7.67>1.96 Hence, we reject the null hypothesis and have sufficient evidence to conclude that there is a significant relationship between the cover size and the selling price of the house. Thus, as the cover size increases, selling price of the house increases

3) As bdrms increase, HP also increases B3 > 0 Null Hypothesis : B3 = 0 Alternative Hypothesis: B3 =/ 0 Tc = b3 B3/se(b3) Tc = 0.099245/0.102006
Tc = 0.972936

d.f. = 88 4 = 84 Level of Significance = 0.025 T(Tab) = 1.960 Tc < T(tab) = 0.97>1.96 Hence, we fail to reject the null hypothesis and do not have sufficient evidence to conclude that there is a significant relationship between the number of bedrooms and the selling price of the house. Thus we dont have sufficient evidence that as the number of bedrooms increase, the selling price of the house also increases.