5. Here we want to test whether the assessed housing price (assess below) is a r

Question

5. Here we want to test whether the assessed housing price (assess below) is a rational prediction for the actual housing price (price below) using variables = house price assess the assessed housing value (before the house was sold) Consider a simple regression model price B1 +Bzassess+e, the assessment is rational if B10 and 1. The estimated equation and other related information are given by price -14.47 + 0.976 assess (16.27) (0.049) 88, = RSS= 165, 644, R2=0.82 n = where the numbers in the parentheses are standard errors. Assume that Classical Assumptions for SLRM (Simple Linear Regression Model) hold. Do the following questions.

Explanation / Answer

f) House with assessment of 100000 = -14.47+0.976* 100000 =

With assessment of 140000 = -14.47 +0.976* 140000 =

Estimated differecne = 0.976* 40000 = 39040

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