You are a real estate dealer, who investigates the pricing system of a housing market. You have a sample of 1,500 house

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You Are A Real Estate Dealer Who Investigates The Pricing System Of A Housing Market You Have A Sample Of 1 500 House 1 (47.37 KiB) Viewed 20 times

You are a real estate dealer, who investigates the pricing system of a housing market. You have a sample of 1,500 house sales transactions with the variables: Price: Price of the house in US dollars) LivArea: Livingroom area LivAreaSq: Livingroom area squared Age: Age of house AgeSq: Age of house squared Beds: Number of bedrooms Baths: Number of bathrooms You run the hedonic regression with sample size T = 1,500 and obtain the following outcomes. LivArea Price 10.680.0*** (581.7) Price 2.994.7 (17452) Age -830.4 (231.4) -11.33 (90.02) -15.552.4 (2274.6) Beds Baths -7,019.3 (4434.0) -11.9219 (2002.9) 4.971.1 (4860.5) 169.1 LivArcasa Ages 1423 (4.145) cons 11.154.3 79.755.7*** (7151.0) (147623) N 1,500 1.500 ESS 3,885,889,967.258 4.053.512,007590 RSS 2,111,121,941 235 1,943,499.900.903 Standard errors in the p<0.05, p<0.01, p<0.001 (1) Briefly describe the concept of hedonic regression. Also, derive the R2 for both Model (i) and (ii). Weight: 8.33%) (2) In Model (), describe the two-sided hypothesis and its alternative for testing if the coefficient of Beds is equal to -10,000. Then, test the hypothesis with a t-statistic. [Weight: 8.33%) (3) Using the 5 percent significance level, test whether LivAreaSq and AgeSq help explain selling price. Weight: 8.33%) (4) In Model (ii), your client, who want to sell her house, has a living room area of 2,000 feet. She is planning to extend her living room by 500. What is the expected increase in price your client will get from this extension? Weight: 8.33%)