Problem
Estimate a hedonic regression for the HousePrices data taken from Anglin and Gen¸cay (1996), which contain prices of houses sold in the city of Windsor, Canada, during July, August, and September 1987. These data are also used in the textbook by Verbeek (2004).
(a) Fit a multiple linear regression model to the logarithm of the price, using all remaining variables as regressors. Experiment with models containing lot size, number of bathrooms, number of bedrooms, and stories in logarithms and in levels, respectively. Which model do you prefer?
(b) What is the expected price of a two-story house of 4,700 sq. ft. with three bedrooms, two bathrooms, a driveway, no recreational room, a full finished basement, without gas heating or air conditioning, and two-car garage, that is not located in a preferred area? Report also a prediction interval.
(c) In order to determine whether the logarithmic transformation of the dependent variable is really appropriate, a Box-Cox transformation might be helpful. Use the function boxcox() from the package MASS. What do you conclude?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.