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Assignmement 4

Assignment 4 is an optional extra credit task due by 6:00 PM on Nov 26, 2021, allowing individual or group submissions of up to three members. The assignment involves analyzing a dataset related to house prices and requires the use of statistical software for regression analysis, with specific models to be estimated and interpreted. Students must submit their work as a PDF with proper identification and formatting, and late or handwritten submissions will not be accepted.

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Lu Tung Ming
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28 views2 pages

Assignmement 4

Assignment 4 is an optional extra credit task due by 6:00 PM on Nov 26, 2021, allowing individual or group submissions of up to three members. The assignment involves analyzing a dataset related to house prices and requires the use of statistical software for regression analysis, with specific models to be estimated and interpreted. Students must submit their work as a PDF with proper identification and formatting, and late or handwritten submissions will not be accepted.

Uploaded by

Lu Tung Ming
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Assignment 4 (Total points: 28)

1. This is an optional extra credit assignment.

2. This assignment is due by 6:00 PM, Friday, Nov 26, 2021 and will be discussed in the
last tutorial during the revision week.

3. You can do this assignment individually or in group. The maximum group size is 3.
(Note: You are free to team up with different students in different assignments.)

4. A Moodle submission link will be created later for you to hand in the assignment.

5. Save your assignment as a pdf file and use your name as file name. Please indicate your
name and UID on the front page of your assignment. In the case of group work, you can
use the name of a groupmate as file name. Please indicate the name and UID of everyone
on the front page and submit one file for the group.

6. The whole assignment must be typed. Late or handwritten assignments will be given a
zero score.

1
Refer to the data set for Assignment 4. The variables are as follows:

hprice sale price (in 1,000 dollars)


size size of the house (in 100 square feet)
bdrms number of bedrooms
bathrms number of bathrooms
age age of the house (in years)
own = 1 if owner occupied at time of sale; = 0 otherwise (e.g. vacant/ tenant)
pool = 1 if the house has a swimming pool; = 0 otherwise
tradit = 1 if the house is of traditional style; = 0 otherwise
fireplc = 1 if the house has a fireplace; = 0 otherwise
wfront = 1 if the house is located on the waterfront; = 0 otherwise

(a) (14 points) Consider Model (I) below:

(I) 𝑙𝑙𝑙𝑙𝑙𝑙(ℎ𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝) = 𝛽𝛽0 + 𝛽𝛽1 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 + 𝛽𝛽2 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 + 𝛽𝛽3 𝑏𝑏𝑏𝑏𝑏𝑏ℎ𝑟𝑟𝑟𝑟𝑟𝑟 + 𝛽𝛽4 𝑎𝑎𝑎𝑎𝑎𝑎 + 𝛽𝛽5 𝑜𝑜𝑜𝑜𝑜𝑜 +
𝛽𝛽6 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 + 𝛽𝛽7 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽8 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓 + 𝛽𝛽9 𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤 + 𝑢𝑢

where 𝑙𝑙𝑙𝑙𝑙𝑙 means natural log. Estimate Model (I) with stata and attach your regression
output. Then interpret the sign (is it reasonable and why?) and magnitude of the coefficients
for these four regressors: bdrms, own, pool, and wfront.

(b) (2 points) Add the interactive regressor (𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤)(𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡) to the above model:

(II) 𝑙𝑙𝑙𝑙(ℎ𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝) = 𝛽𝛽0 + 𝛽𝛽1 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 + 𝛽𝛽2 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 + 𝛽𝛽3 𝑏𝑏𝑏𝑏𝑏𝑏ℎ𝑟𝑟𝑟𝑟𝑟𝑟 + 𝛽𝛽4 𝑎𝑎𝑎𝑎𝑎𝑎 + 𝛽𝛽5 𝑜𝑜𝑜𝑜𝑜𝑜 +
𝛽𝛽6 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 + 𝛽𝛽7 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽8 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓 + 𝛽𝛽9 𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤 + 𝛽𝛽10 (𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤𝑤)(𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡) + 𝑢𝑢

From Model (II), write down the sub-model relevant for non-traditional style houses not
located on the waterfront.

(c) (12 points) Estimate Model (II) in part (b) with stata and attach your regression output. Then
find the approximate percentage price difference between each of the following three types
of houses:

i. traditional style houses not located on the water front.


ii. non-traditional style houses located on the water front.
iii. traditional style houses located on the water front.

and non-traditional style houses not located on the waterfront.

Based on your answers, does being located on the water front always confer a price
advantage to a house?

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