Question #119
Reading: Reading 1 Multiple Regression
PDF File: Reading 1 Multiple Regression.pdf
Page: 58
Status: Unattempted
Correct Answer: A
Question
Which of the following is a potential remedy for multicollinearity?
Answer Choices:
A. Take first differences of the dependent variable
B. Add dummy variables to the regression
C. Omit one or more of the collinear variables
Explanation
The first differencing is not a remedy for the collinearity, nor is the inclusion of dummy
variables. The best potential remedy is to attempt to eliminate highly correlated variables.