Location (Summary Post)

The paper titled Location builds the case that distance from franchise restraunts can be accounted for in the sales price. Franchise restaurants are representative of major roads, commercial districts, noise, and light pollution. The hypothesis is that there is a "sweet spot" where postive externalities are maximized, and negative exernalities minimized. The distance is between 1 mile and 4/3 miles from franchise restaurants. It is believed that this distance allows for an adaquate buffer from commercial use while still allowing for convenient access.

H0: β(Distance>1) = 0 ; H1: β(Distance>1) ≠ 0

The model that was built to control for the age, size of the home, and lot is as follows:

YiF= β0 + β1(square feet) +β2(acres) + β3(age) + β4(Distance 4/3) +β5(Distance_between 1/3 and 2/3) + ε

In this model, Distance was turned into a dummy variable dividing 1.3 miles into four portions. Other portions were tested with no success. By splitting Distance into 1/3 portions, the explanatory value of the variable was maximized.

Several variables were thrown out of the model due to statistical irrelevance or issues with correlation. These include the dummy variables for beds and baths, school district, and Distance 1/3, and Distance 3/3. By removing these variable the model was stronger and more apt.

The F-Statistic measures the model's overall strength. The result is: 243.907
The R^2 Statistic is a measurement of confidence. The result is: .787
The Adjusted R^2 controls for the loss of df. The result is: .784
The t-statistics are listed in the order of the model: 2.317; 26.623; 2.951;
-5.453, 2.044; -1.653

After looking at the residuals (Histogram, Normal P-Plot of Standardized Residuals, and Scatter plot) they appear to be normal, linear, homoskedastic, and the kurtosis looked great. Multi-collinearity did not appear to be an issue either.

The end result with regard to the Distance 3/3 variable's B-coefficient is:

P(9,107.512 < B < 26,555.36) =.95


In conclusion, the null hypothesis is rejected.