Multiple Choice
What should we do when we have multicollinearity?
A) Ignore it no matter what.
B) Drop some of the independent variables.
C) Consider testing whether the highly collinear variables are jointly significant.
D) Add more independent variables in order to reduce multicollinearity.
Correct Answer:
Verified
Correct Answer:
Verified
Q1: Explain goodness of fit and talk about
Q2: Measurement error in the dependent variable causes
Q3: Adding more independent variables can reduce multicollinearity.
Q5: By adding more independent variables into our
Q6: Explain the challenges in the model specification
Q7: In a case where there is multicollinearity
Q8: Perfect multicollinearity means all independent variables are
Q9: Explain the omitted variable bias problem, and
Q10: Which of the following are consequences of
Q11: When using an auxiliary equation to