Question
A local real estate company wants to better understand the housing market in the Seattle area. The company hires you to do some analysis. Suppose
A local real estate company wants to better understand the housing market in the Seattle area. The company hires you to do some analysis. Suppose that you have collected information on the selling price of 138 houses that have recently sold.Now suppose that in addition to the selling prices you also have data on some other characteristics of these 138 houses. The information available on each house is as follows:
PRICE = selling price (in $1,000).
SIZE = gross living space (in square feet).
AGE = age of the house (in years).
BDRM = number of bedrooms.
DOWNTOWN = 1 if the house is in downtown Seattle, 0 if outside downtown.
You run a multiple regression analysis on this data using SIZE, AGE, BDRM and DOWNTOWN to predict PRICE, which produces the following report:
Adj-R Square | 0.776 | ||
Standard Error | 86.772 | ||
Coefficients | Lower 95% | Upper 95% | |
Intercept | 180.833 | -871.169 | 1232.834 |
SIZE | 0.307 | 0.144 | 0.470 |
AGE | -3.571 | -7.650 | 0.508 |
BDRM | 45.421 | -51.183 | 142.024 |
DOWNTOWN | 175.341 | 28.634 | 322.048 |
One of your colleagues runs a different regression on these 138 houses, using only SIZE and DOWNTOWN as the independent variables to predict PRICE. The regressions results are as follows:
Adj-R Square | 0.783 | ||
Standard Error | 82.26 | ||
Coefficients | Lower 95% | Upper 95% | |
Intercept | 185.833 | -866.9 | 1237.4 |
SIZE | 0.320 | 0.157 | 0.483 |
DOWNTOWN | 178.134 | 31.434 | 325.865 |
Question: Suppose you are talking to Jaime, a marketing manager in the real estate company, about this new 2-variable regression model. You tell Jaime that the confidence interval for SIZE does not contain zero, applying your knowledge from QMETH450. Jaime then asks you what your statement means. Give a precise explanation of the significance of the 95% confidence interval not containing zero.
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