A commercial real estate company evaluates vacancy rates, square footage
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A commercial real estate company evaluates vacancy rates, square footage

Refer to Commercial properties Problem 6.18.

a. Fit first-order linear regression model (6.1) tor relating rental rates (Y) to property age (X1) and size (X4). State the fitted regression function.

b. Compare the estimated regression coefficients for property age and size with the corresponding coefficients obtained in Problem 6.18c. What do you find?

c. Does SSR(X4) equal SSR(X4 IX3) here? Does SSR(X1) equal SSR(X1, IX3)?

d. Refer to the correlation matrix obtained in Problem 6.18b. What bearing does this have on your findings in parts (b) and (c)?

Problem 6.18

Commercial properties. A commercial real estate company evaluates vacancy rates, square footage, rental rates, and operating expenses for commercial properties in a large metropolitan area in order to provide clients with quantitative information upon which to make rental decisions. The data below are taken from 81 suburban commercial properties that are the newest, best located, most attractive, and expensive for five specific geographic areas. Shown here are the age (XI), operating expenses and taxes (Xl),vacancy rates (X3), total square footage (X4),


a. Prepare a stem-and-leaf plot for each predictor variable. What information do these plots provide?

b. Obtain the scatter plot matrix and the correlation matrix. Interpret these and state your principal findings.

c. Fit regression model (6.5) for four predictor variables to the data. State the estimated regression function.

d. Obtain the residuals and prepare a box plot of the residuals. Does the distribution appear to be fairly symmetrical?

e. Plot the residuals against , each predictor variable, and each two-factor interaction tenn on separate graphs. Also prepare a normal probability plot. Analyze your plots and summarize  your findings.

f. Can you conduct a formal test for lack of fit here?

g. Divide the 81 cases into two groups. placing the 40 cases with the smallest fitted values  into group I and the remaining cases into group 2. Conduct the Brown-Forsythe test for constancy of the error variance, using ex = .05. State the decision rule and conclusion.

Hint
StatisticsA correlation matrix refers to a table that displays correlation. It is best used in variables exhibiting a linear relationship between themselves. A correlation matrix is made up of rows and columns which show the variables. The fit of data in a correlation matrix can be represented visually in a scatterplot....

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