7.5 For this question use data set HPRICE.XLS, the five dummy variables, D1 to D5, listed in Exercise 7.4 and the following four non-dummy explanatory variables:

• X1 = the lot size of the property (in square feet)

• X2 = the number of bedrooms

• X3 = the number of bathrooms

• X4 = the number of storeys (excluding the basement).

(a) Run a regression of Y on D1, . . . , D5, X1, . . . , X4.

(b) Discuss which variables are statistically significant.

(c) Which of the characteristics measured by the dummies has the largest effect on housing prices?

(d) Choose particular configurations of the dummy variables (e.g. one indicating a house with: a driveway, no recreation room, a basement, no gas central heating and no air conditioner) and write out the formula for the regression line.

(e) Discuss results relating to the non-dummy explanatory variables, paying particular reference to the ceteris paribus conditions.