Reference no: EM131997011

In the following regression model:

ln(HousePrice)=β₁+β₂Size+β₃Bedrooms+u we study the effect of house size and number of bedrooms on the house price. 

Based on this regression, how do we assess the effect of the characteristics of the house (both size and number of bedrooms) on the sale price of the house at the 10% significance level?

A. Use a t-test for H₀ :  β₂ = 0 against H₀ :  β₂ ≠ 0    at the 10% significance level, and use a t-test for H₀ :  β₃ = 0 against  H₀ :  β₃ ≠ 0 at the 10% level. Reject if at least one of the t-tests rejects.

B. None of the stated options is correct.

C. Use a t-test for  H₀ :  β₂ = 0 against H₀ :  β₂ ≠ 0   at 5% level, and use a t-test for H₀ :  β₃ = 0   against H₀ :  β₃ ≠0   at 5% level. Reject if at least one of the t-tests rejects.

D. Use a F-test for the overall significance of the regressors at the 10% significance level.