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Regression Analysis

In Hawaii, condemnation proceedings are underway to enable private citizens to own the property that their homes are built on. Until recently, homeowners leased the land from the estate. In order to comply with the new law, a large Hawaiian estate wants to use regression analysis to estimate the fair market value of the land. Each of the following 3 models were fit to data collected for n=20 properties, 10 of which are near a cove.

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.985
R Square 0.970
Standard Error 9.5
Observations 20

ANOVA

df SS MS F Signif F
Regression 5 28324 5664 62.2 0.0001
Residual 14 1279 91
Total 19 29063

Coeff StdError tStat P-value
Intercept -32.1 35.7 -0.90 0.3834
Size 12.2 5.9 2.05 0.0594
Cove -104.3 53.5 -1.95 0.0715
Size*Cove 17.0 8.5 1.99 0.0661
SizeSq -0.3 0.2 -1.28 0.2204
SizeSq*Cove -0.3 0.3 -1.13 0.2749

Referring to the table, given a quadratic relationship between sale price (Y) and property size (X1), what null hypothesis would you test to determine whether the curves differ from cove and non-cove properties?

a. H0: B2=B3=B5=0
b. H0: B3=B5=0
c. H0: B4=B5=0
d. H0: B2=0

Solution Preview

The answer is (b) H0: B3=B5=0
Since it is given that a ...

Solution Summary

The solution describes the selection of appropriate null hypothesis for testing the significance of the linear and non-linear influence of a factor in a Regression analysis.

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