How would you rationalize negative sign for this variable

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Reference no: EM13881455

In studying the purchase of durable goods Y (Y = 1 if purchased, Y = 0 if no purchase) as a function of several variables for a total of 762 house- holds, Janet A. Fisher* obtained the following LPM results:

Explanatory variable

Coef?cient

Standard error

Constant

0.1411

-

1957 disposable income, X1

0.0251

0.0118

(Disposable income = X1)2, X2

-0.0004

0.0004

Checking accounts, X3

-0.0051

0.0108

Savings accounts, X4

0.0013

0.0047

U.S. Savings Bonds, X5

-0.0079

0.0067

Housing status: rent, X6

-0.0469

0.0937

Housing status: own, X7

0.0136

0.0712

Monthly rent, X8

-0.7540

1.0983

Monthly mortgage payments, X9

-0.9809

0.5162

Personal noninstallment debt, X10

-0.0367

0.0326

Age, X11

0.0046

0.0084

Age squared, X12

-0.0001

0.0001

Marital status, X13 (1 = married)

0.1760

0.0501

Number of children, X14

0.0398

0.0358

(Number of children = X14)2, X15

-0.0036

0.0072

Purchase plans, X16 (1 = planned; 0 otherwise)

0.1760

0.0384

2 = 0.1336

a. Comment generally on the ?t of the equation.

b. How would you interpret the coef?cient of -0.0051 attached to checking account variable? How would you rationalize the negative sign for this variable?

c. What is the rationale behind introducing the age-squared and number of children-squared variables? Why is the sign negative in both cases?

d. Assuming values of zero for all but the income variable, ?nd out the conditional probability of a household whose income is $20,000 pur- chasing a durable good.

e. Estimate the conditional probability of owning durable good(s), given: X1 = $15,000, X3 = $3000, X4 = $5000, X6 = 0, X7 = 1, X8 = $500, X9 = $300, X10 = 0, X11 = 35, X13 = 1, X14 = 2, X16 = 0.

Reference no: EM13881455

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