Evaluate the quality of the model

Reference no: EM13123933

An association of home builders is interested in knowing how private housing starts (PHS) are influenced by mortgage interest rates (MR) and the level of income (INC). Using quarterly data for 10 years, the following multiple regression model was estimated:

PHS = a + b₁MR + b₂INC.

Your expectation is that the slope term for the mortgage rate should be negative, whereas the slope term for the income variable should be positive. The following estimation results were obtained:

Variable Coefficient Standard Error T-statistic Significance

CONST -325.679 314.562 -1.03534 .307

MR -29.7924 4.97884 -5.98381 .000

INC .110325 .336273E-01 3.28081 .003

No. of Observations = 40 R² = .4986 (adj) = .4715

Sum of Sq. Resid. = 231958. Std. Error of Reg. = 79.1779

Durbin-Watson = 1.84280

F(2, 37) = 18.3945

Significance = .000003

a) Test the null hypotheses that the slope terms are individually insignificant using one-tailed t-tests using a .05 level of significance.

b) Evaluate the quality of the model.

Reference no: EM13123933

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