Suppose that a researcher, by using a sample of transactions of residential houses, wants to estimate how the price of the houses is affected by the absence of anelevator in the building. To this end, he regresses the price of the house in thousands euro, price, on the dummy no_elevator indicating the absence of the elevator(dummy equal to 1) or the presence (dummy equal to 0):price; = a0 +a1 no_elevator; + u;The OLS estimates are (standard errors in round brackets below the corresponding coefficient):price;= 199.937 – 73.068 no_elevator;(5.482)R2 = 0.036(10.735)Unfortunately, he makes an informatic mistake so that he uses the original dummy adding a value of 2, i.e. a variable that takes value 3 if there is not an elevator in thebuilding and 2 if there is.How will the estimated value of the coefficients be affected by this mistake?O (a) The intercept will increase whereas the coefficient of the dummy will decreaseO (b) The intercept will increase whereas the coefficient of the dummy will be unaffectedO (c) The intercept will decrease whereas the coefficient of the dummy will be unaffectedO (d) None of the above

The correct answer is option (c).

Answered: Suppose that a researcher, by using a…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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