Carry out the f test for the joint hypothesis

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Reference no: EM13212363

Wooldridge Problem 4.6 In section 4.5, we used as an example testing the rationality of assessments of housing prices. There, we used a log-log model in price and assess. Here, we use a level-level formulation.

i. In the simple regression model Price = f0 + f1assess + u the assessment is rational if f1 = 1 and f0 = 0. The estimated equation is price= -14.47 + .976assess (16.27) (.049) n = 88, SSR = 165,644.51, R2 = .820. First, test the hypothesis that H0: f0 = 0 against the two-sided alternative. Then, test H0: f1 = 1 against the two-sided alternative. What do you conclude?

ii. To test the joint hypothesis that H0: f0 = 0 and H0: f1 = 1, we need the SSR in the restricted model. This amounts to computing pricei - assessi)2 where n = 88, since the residuals in the restricted model are just pricei - assessi.. (No estimation is needed for the restricted model because both parameters are specified under H0.) This turns out to yield SSR = 209,448.99. Carry out the F test for the joint hypothesis.

iii. Now, test H0: f2 = 0, f3 = 0, and f4 = 0 in the model Price = f0 + f1assess + f2lotsize + f3sqrft + f4bdrms + u The R-squared from estimating this model using the same 88 houses is .829.

iv. If the variance of price changes with assess, lotsize, sqrft, or bdrms, what can you say about the F test from part (iii)?

Reference no: EM13212363

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Carry out the f test for the joint hypothesis : Now, test H0: f2 = 0, f3 = 0, and f4 = 0 in the model Price = f0 + f1assess + f2lotsize + f3sqrft + f4bdrms + u The R-squared from estimating this model using the same 88 houses is .829. iv. If the variance of price changes with assess, lotsize, sqrf..

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