Exam 15: Multiple Regression

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It is okay for independent variables not to be correlated with the dependent variables, as long as they are highly correlated with each other.

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Outliers are observations whose multiple regression residuals exceed three standard deviations.

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A dummy variable can have only two values.

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The error term accounts for all variables not specified in the model.

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Autocorrelation is common with time series data.

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When two variables are multicollinear, they are strongly correlated with each other.

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The assumption of full model specification is that variables not specified in the model are justifiably omitted only when their cumulative effect on the dependent variable is zero.

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Values of R2 adjusted below .20 are considered to suggest weak model fit, those between .20 and .40 indicate moderate fit, those above .40 indicate strong fit, and those above .65 indicate very strong model fit.

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Curvelinearity is addressed by transforming one of the independent variables.

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