Question #132

Reading: Reading 1 Multiple Regression

PDF File: Reading 1 Multiple Regression.pdf

Page: 65

Status: Unattempted

Correct Answer: A

Part of Context Group: Q132-134 First in Group
Shared Context
- Using Model ONE, what is the sales forecast for the second quarter of the next year? A) $51.09 million. B) $46.31 million. C) $56.02 million.
Question
Which model misspecification is most likely to cause multicollinearity?
Answer Choices:
A. Inappropriate variable scaling
B. Inappropriate variable form
C. Ommission of important variable(s)
Explanation
Inappropriate variable scaling may lead to multicollinearity or heteroskedasticity in residuals. Omission of important variable may lead to biased and inconsistent regression parameters and also heteroskedasticity/serial correlation in residuals. Inappropriate variable form can lead to heteroskedasticity in residuals.
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