1. Takehome One Econ 240A Fall 2010

2. Question 3 (a) regression is significant (b) significant explanatory variables (c) t<1 does not add to explained variance

3. Student’s t- distribution 1.98 -1.98 2.5%

4. Question 4 a. Constant is not significant

5. Question 5 a.All explanatory variables are significant

6. Question 5b

7. Question 6 a.Tax is significant b.With a positive sign c.Does not make economic Sense. Multiple regression is holding all other variables Constant, i.e. partial effect of tax on price. Would you pay more for a house with a high Property tax bill?

8. Question 7 Estimated price = 36.34 +.007028*100,000 = $739.14

9. Question 7 b

10. Question 7c

11. Question 7 d

12. White’s test for heteroskedasticity

13. View Residual tests White heteroskedasticity

14. Why is there heteroskedasticity in the errors for tax = c+bprice+e

15. Simultaneity ( two-way causality) Tax price Tax bill depends on house price Price decreases with tax bill

16. Question 8 Note: the slope is a little more positive than for OLS. The latter may be biased a little towards zero. See upper right hand part of graph on next slide

17. Part 8 Plot of Tax, taxols, tax2sls Vs. Prices