Economics 535 Take-Home Project 2013 15 points Dr. Stokes

You have been hired as a consultant for a developer who is interested in the dynamics of the housing market. You have been given data on housing values in Boston and California.

b34sexec options ginclude('b34sdata.mac') member(bostonh); b34srun;

loads data on Boston.

B34S 8.11D (D:M:Y) 8/ 4/09 (H:M:S) 15: 8:54 DATA STEP Boston Housing Data PAGE 1

Variable Label # Cases Mean Std. Dev. Variance Maximum Minimum

CRIM 1 per capita crime rate by town 506 3.61352 8.60155 73.9866 88.9762 0.632000E-02

ZN 2 prop. resid land zoned> 25,000 sq f 506 11.3636 23.3225 543.937 100.000 0.00000

INDUS 3 prop. non-retail business acres per town 506 11.1368 6.86035 47.0644 27.7400 0.460000

CHAS 4 Charles River dummy 1 if tract on river 506 0.691700E-01 0.253994 0.645130E-01 1.00000 0.00000

NOX 5 nitric oxides concentration(pp 10 mill. 506 0.554695 0.115878 0.134276E-01 0.871000 0.385000

RM 6 average number of rooms per dwelling 506 6.28463 0.702617 0.493671 8.78000 3.56100

AGE 7 prop. owner-occupied units built < 1940 506 68.5749 28.1489 792.358 100.000 2.90000

DIS 8 weighted dist. 5 Boston employment cent. 506 3.79504 2.10571 4.43402 12.1265 1.12960

RAD 9 index of accessibility radial highways 506 9.54941 8.70726 75.8164 24.0000 1.00000

TAX 10 full-value property-tax rate per $10,000 506 408.237 168.537 28404.8 711.000 187.000

PTRATIO 11 pupil-teacher ratio by town 506 18.4555 2.16495 4.68699 22.0000 12.6000

B 12 1000(Bk - 0.63)^2. Bk=proportion blacks 506 356.674 91.2949 8334.75 396.900 0.320000

LSTAT 13 % lower status of the population 506 12.6531 7.14106 50.9948 37.9700 1.73000

MEDV 14 Median value occupied homes in $1000 506 22.5328 9.19710 84.5867 50.0000 5.00000

CONSTANT 15 506 1.00000 0.00000 0.00000 1.00000 1.00000

Number of observations in data file 506

Current missing variable code 1.000000000000000E+31

b34sexec options ginclude('learndat.mac') member(cal_house); b34srun;

loads data on California.

B34S 8.11D (D:M:Y) 8/ 4/09 (H:M:S) 15: 8:57 DATA STEP Housing Data PAGE 2

Variable Label # Cases Mean Std. Dev. Variance Maximum Minimum

HOUSEVAL 1 Median house value in units of $100,000 20640 2.06856 1.15396 1.33161 5.00001 0.149990

M_INCOME 2 Median Income 20640 3.87067 1.89982 3.60932 15.0001 0.499900

HOUSEAGE 3 Housing Median Age 20640 28.6395 12.5856 158.396 52.0000 1.00000

N_ROOMS 4 Average Number of rooms 20640 5.42900 2.47417 6.12153 141.909 0.846154

N_BED 5 Number of beds 20640 1.09668 0.473911 0.224592 34.0667 0.333333

POP 6 Population 20640 1425.48 1132.46 0.128247E+07 35682.0 3.00000

AVE_OCC 7 Average Occupancy 20640 3.07066 10.3860 107.870 1243.33 0.692308

LATITUDE 8 Latitude 20640 35.6319 2.13595 4.56229 41.9500 32.5400

LONG 9 Longitude 20640 -119.570 2.00353 4.01414 -114.310 -124.350

CONSTANT 10 20640 1.00000 0.00000 0.00000 1.00000 1.00000

Number of observations in data file 20640

Current missing variable code 1.000000000000000E+31

Your task is to estimate models for MEDV and HOUSEVAL using the data you have been given. First discuss what are the expected signs of each variable. Next report your results and discuss what you have found. Test your model as necessary. To obtain credit you should place your results in a table, not just copy the regression output into the word file. Write up your results as if you were writing a report!

Extra credit: It is always a good idea to test for nonlinearity. Using the GAM model, which is discussed in Chapter 14, attempt to test each of your models for nonlinearity. Learning objective: We have not covered GAM models in the class. However this extra credit question will test how well you are able to read about a "new" procedure and implement it. Hint. The B34S procedure GAMFIT can be used. GAM is also in SAS and in R. Help: The file learnruns.machas sample setups on the two files using a variety of methods. These might be helpful in your work. See also Chapter 17. These procedures are also in R

The file learndat.mac is on smith and will be automatically loaded into c:\b34slm\lib if you update B34S on the PC. The SAS datafiles boston_house.sas and cal_house.sas are available on the class web page. Stata datafiles bostonh.dct and cal_house.dct are available from the class web page. To use these files in Stata

infile using c:\stata\bostonh.dct