A Realtor Wants to Predict and Compare the Prices of Homes

question 13

Essay

A realtor wants to predict and compare the prices of homes in three neighboring locations. She considers the following linear models:
Model A: Price = β₀ + β₁ Size + β₂ Age + ε
Model B: Price = β₀ + β₁ Size + β₃ Loc1 + β₄ Loc2 + ε
Model C: Price = β₀ + β₁ Size + β₂ Age + β₃ Loc1 + β₄ Loc2 + ε
where,
Price = the price of a home (in $1,000s)
Size = the square footage (in sq. feet)
Loc1 = a dummy variable taking on 1 for Location 1, and 0 otherwise
Loc2 = a dummy variable taking on 1 for Location 2, and 0 otherwise
After collecting data on 52 sales and applying regression, her findings were summarized in the following table. Note: The values of relevant test statistics are shown in parentheses below the estimated coefficients.
Using Model C, what is the conclusion for testing the joint significance of the two dummy variables at the 1% significance level?

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Definitions:

Trait Perspective

A view in psychology that focuses on the identification and measurement of specific personality characteristics or traits.

Goals of Psychology

To describe, explain, predict, and control behavior and mental processes through scientific methods.

Big Five Personality Traits

The Big Five personality traits are a model that outlines five broad dimensions of human personality: openness, conscientiousness, extraversion, agreeableness, and neuroticism.

Conscientiousness

The care a person gives to organization and thoughtfulness of others; dependability.