LO2.2

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 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 “Regression 1” and the original tab “Original Data.” Now click on the tab for “Regression 1.” 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) For each variable, explain what the sign of the regression coefficient is, what the magnitude is (i.e., if x goes up by one unit how much does y increase by), and whether or not the results of your regression are consistent with what you believed the sign and magnitude to be. Then explain if any variables are insignificant.

• Use p < 0.1 as the p-value cutoff for whether results are significant. (b) 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. (c) Explain briefly if there are any variables in the data set you think should have been included and, if so, why. You must refer to at least one other variable. IMPORTANT: TYPE YOUR ANSWERS IN A TEXT BOX (“INSERT” A TEXT BOX). MAKE SURE TO ADDRESS EACH QUESTION (a, b, and c) LO2.3 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 Northamp- ton, MA. The data are located in the file ‘house prices.xlsx’ (same data used above) 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. 1. Create a copy of the same data set used for “LO2.2” 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 “Regression 2” and the original tab “Original Data.” Now click on the tab for “Regression 2.” Then answer the question: (a) Estimate the model where house prices (“price2014” variable) 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) Create another copy of the “original data” following the same steps used before and label this new tab “Regression 3.” Estimate a new model where house prices are affected by both rail distance and previous prices (“price1998”) only. What is the sign and new magnitude of the coefficient on rail distance, and what is the fit of the regression? (c) Create another copy of the “original data” following the same steps used before and label this new tab “Regression 4.” 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 (select at least one more variable and explain briefly why). 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. IMPORTANT: SHOW ALL YOUR NUMERIAL ANSWERS IN THE EXCEL SHEETS AND TYPE YOUR ANSWERS IN A TEXT BOX (“INSERT” A TEXT BOX). MAKE SURE TO ADDRESS EACH QUESTION (a, b, c, and d). 2