A Study Investigated the Impact of House Price Appreciation on Household

question 27

Essay

A study investigated the impact of house price appreciation on household mobility.The
underlying idea was that if a house were viewed as one part of the household's portfolio,
then changes in the value of the house, relative to other portfolio items, should result in
investment decisions altering the current portfolio.Using 5,162 observations, the logit
equation was estimated as shown in the table, where the limited dependent variable is one
if the household moved in 1978 and is zero if the household did not move:
14 $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Regression } \\\text { model }\end{array} & \text { Logit } \\\hline \text { constant } & - 3.323 \\& ( 0.180 ) \\\hline \text { Male } & - 0.567 \\& ( 0.421 ) \\\hline \text { Black } & - 0.954 \\& ( 0.515 ) \\\hline \text { Married } 78 & 0.054 \\& ( 0.412 ) \\\hline \text { marriage } & 0.764 \\\text { change } & ( 0.416 ) \\\hline \text { A7983 } & - 0.257 \\& ( 0.921 ) \\\hline \text { PNRN } & - 4.545 \\& ( 3.354 ) \\\hline \text { Pseudo- } \mathrm { R } ^ { 2 } & 0.016 \\\hline\end{array}$$ where male, black, married78, and marriage change are binary variables.They indicate,
respectively, if the entity was a male-headed household, a black household, was married,
and whether a change in marital status occurred between 1977 and 1978.A7983 is the
appreciation rate for each house from 1979 to 1983 minus the SMSA-wide rate of
appreciation for the same time period, and PNRN is a predicted appreciation rate for the
unit minus the national average rate.
(a)Interpret the results.Comment on the statistical significance of the coefficients.Do the
slope coefficients lend themselves to easy interpretation?

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Definitions:

Debt Ratio

A financial ratio that compares the amount of a company's debt to its total assets, indicating the proportion of a company's assets that are financed through debt.

Cash Flow from Operations

The amount of cash a company generates through its regular business operations over a specific period.

Net Income

The total profit of a company after all expenses and taxes have been deducted from total revenue.

Maturing Debt

Debt that is due for repayment within the next fiscal year or operating cycle, whichever is longer.