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A book publisher is interested in what makes a book successful. In order to answer this question the publisher provides you with a dataset of
A book publisher is interested in what makes a book successful. In order to answer this question the publisher provides you with a dataset of books they have published in the last 5 years (PS2.dta). For each book this dataset contains information on the number of thousands of books sold (sales), the length of the book in number of pages (length), if the book was originally written in english (english english = 0 otherwise) and whether the book is fiction or non-fiction (fiction book is fiction, fiction = 1 if it was originally written in english, = 1 if the = 0 if the book is non-fiction). In order to analyze the data you first estimate the following population regression models: Sales aoa1length + a2fiction + agenglish +U (1) 2. (21 points) Imagine that you don't believe that equation (1) is the correct pop- ulation regression model. Instead you think that the correct population regression model should take into account that the length of a book affects sales by a different amount depending on if the book was originally written in english and if the book is fiction. Estimate this regression using OLS and interpret all the estimates. You can assume that all Gauss-Markov assumptions hold when interpreting the estimates (Answer in less than 60 words for each parameter you interpret) 3. (13 points) Using the estimates from question 2. provide a prediction of how much an english non-fiction book of 200 pages should sell A book publisher is interested in what makes a book successful. In order to answer this question the publisher provides you with a dataset of books they have published in the last 5 years (PS2.dta). For each book this dataset contains information on the number of thousands of books sold (sales), the length of the book in number of pages (length), if the book was originally written in english (english english = 0 otherwise) and whether the book is fiction or non-fiction (fiction book is fiction, fiction = 1 if it was originally written in english, = 1 if the = 0 if the book is non-fiction). In order to analyze the data you first estimate the following population regression models: Sales aoa1length + a2fiction + agenglish +U (1) 2. (21 points) Imagine that you don't believe that equation (1) is the correct pop- ulation regression model. Instead you think that the correct population regression model should take into account that the length of a book affects sales by a different amount depending on if the book was originally written in english and if the book is fiction. Estimate this regression using OLS and interpret all the estimates. You can assume that all Gauss-Markov assumptions hold when interpreting the estimates (Answer in less than 60 words for each parameter you interpret) 3. (13 points) Using the estimates from question 2. provide a prediction of how much an english non-fiction book of 200 pages should sell
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