Researchers frequently work in teams to help minimize the ri

Researchers frequently work in teams to help minimize the risk of bias. This econometric model will test the realtor’s theory that location is the most important factor in determining the value of a home. Simply stated this theory is “location, location, location.” To test this hypothesis, include variables that estimate the value of the home by the home’s characteristics (e.g., number of rooms or bathrooms) and the neighborhood’s characteristics (e.g., noise, traffic, crime). There is no one correctly specified model that you will be evaluated on, but you should use this discussion to justify which variables are include in your model and evaluate the overall fit of the econometric model to the simple theory put forth by the real estate industry.

What are some examples/ways to test the hypothesis?

Solution

Take some variables for each characteristics for example

number of rooms with noise or traffic

you will take a sample of these variables and see the mean and standard deviation

then you can estimate is there is a difference or is there is a relationship between the variables that you choose with a Z-test or T-test to see if you reject your hypothesis or fail to reject