Read and follow all instructions before beginning your assignment.
Question 1
In this assignment you are provided with data from a research paper by Ella Hartenian and Nicholas Horton, who examined whether or not there was a relationship between rail trails and property values in Northampton, MA. The data are located in the file `house prices.xlsx' which is in your e-mail on D2L. Please see the accompanying word document, `documentation.docx,' which describes what each of the columns in the data set mean and how they are scaled. For this assignment you will learn how to estimate a common regression model used in economics, finance, and real estate called a “hedonic price model."
1. Create a copy of the data set by right-clicking the tab at the bottom and clicking `Move or Copy...’, then create another copy of the data set in the same workbook. Label this copy “Modified Data" and the original tab “Original Data." Now click on the tab for “Modified Data." Delete all variables except `price2014,' `bedrooms,' `garage space', `nofullbath', `norooms', `squarefeet,' and `walkscore.' You should have seven total variables. Make sure `price 2014' is the far left variable, then estimate the model where `price2014' is a function of the other six variables. Then answer the questions:
(a) Print out a copy of your Excel output.
(b) For each variable, explain what the sign of the regression coefficient was, what the magnitude was (i.e., if x goes up by one unit how much does y increase by), and whether or not the results of your regression were consistent with what you believed the sign and magnitude to be. Then explain if any variables were insignificant.
(c) Write down the equation of your regression line, including all variables. Next, calculate the average value for each of your six explanatory variables using the AVERAGE() function in Excel. Finally, make a prediction for the price if each of the variables take their average value.
(d) Explain briefly if there are any variables in the data set you think should have been included and, if so, why.
Question 2
In this assignment you are provided with data from a research paper by Ella Hartenian and Nicholas Horton, who examined whether or not there was a relationship between rail trails and property values in Northampton, MA. The data are located in the file `house prices.xlsx' which is in your e-mail on D2L. Please see the accompanying word document, `documentation.docx,' which describes what each of the columns in the data set mean and how they are scaled. For this assignment you will assess whether rail trails influence property values.
2. Create a copy of the data set by right-clicking the tab at the bottom and clicking `Move or Copy...’, then create another copy of the data set in the same workbook. Label this copy “Modified Data" and the original tab “Original Data." Now click on the tab for “Modified Data 2." Delete all variables you consider to be irrelevant to the price of a house. Make sure `price2014' is the far left variable. Then answer the questions:
(a) Estimate the model where house prices are affected by rail distance only. What is the sign and magnitude of the coefficient on rail distance, and what is the fit of the regression?
(b) Estimate a new model where house prices are affected by both rail distance and previous prices. What is the sign and magnitude of the coefficient on rail distance, and what is the fit of the regression?
(c) Estimate a new model where house prices are affected by both rail distance and previous prices, as well as any other variable you consider relevant. What is the sign and magnitude of the coefficient on rail distance, and what is the fit of the regression?
(d) Write a paragraph that answers whether rail trails affect housing prices based on your three models. Print out the Excel output for each model.
