You Have Decided to Analyze the Year-To-Year Variation in Temperature

question 11

Essay

You have decided to analyze the year-to-year variation in temperature data.Specifically
you want to use this year's temperature to predict next year's temperature for certain
cities.As a result, you collect the daily high temperature (Temp)for 100 randomly
selected days in a given year for three United States cities: Boston, Chicago, and Los
Angeles.You then repeat the exercise for the following year.The regression results are as
follows (heteroskedasticity-robust standard errors in parentheses): $\widehat { \operatorname { Temp } _ { t } ^ { B O S } } = 18.19 + 0.75 \times \operatorname { Temp } _ { t - 1 } ^ { B O S } ; R ^ { 2 } = 0.62 , S E R = 12.33$
$(6.46)(0.10)$

$\begin{aligned}\widehat{\operatorname{Temp}_{t}^{C H I}}= & 2.47+0.95 \times \operatorname{Temp}_{t-1}^{C H I} ; R^{2}=0.93, S E R=5.85 \\& (3.98)(0.05)\end{aligned}$

$\widehat { \text { Temp } _ { t } ^ { L A } } = 37.54 + 0.44 \times \text { Temp } _ { t - 1 } ^ { L A } ; R ^ { 2 } = 0.18 , \text { SER } = 7.17$
$(15.33)(0.22)$ (a)What is the prediction of the above regression for Los Angeles if the temperature in the
previous year was 75 degrees? What would be the prediction for Boston?

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Definitions:

Property Taxes

Taxes assessed on real estate by local government, based on the property's assessed value.

Depreciation

The accounting method of allocating the cost of a tangible asset over its useful life, reflecting wear and tear or obsolescence.

Maintenance

The routine tasks and repairs conducted to keep equipment, buildings, or machinery in working order and prevent its deterioration.

Utilities

Services provided to the public or households such as water, electricity, natural gas, sewage treatment, and telecommunications, often subject to government regulations and possibly eligible for tax deductions in certain business contexts.