Question #2
Reading: Reading 1 Multiple Regression
PDF File: Reading 1 Multiple Regression.pdf
Page: 1
Status: Unattempted
Correct Answer: A
Question
When two or more of the independent variables in a multiple regression are correlated with each other, the condition is called:
Answer Choices:
A. multicollinearity
B. conditional heteroskedasticity
C. serial correlation
Explanation
Multicollinearity refers to the condition when two or more of the independent variables, or
linear combinations of the independent variables, in a multiple regression are highly
correlated with each other. This condition distorts the standard error of estimate and the
coefficient standard errors, leading to problems when conducting t-tests for statistical
significance of parameters.