土豆妮

Which of the following is a potential remedy for multicollinearity?

A) Omit one or more of the collinear variables.

B) Take first differences of the dependent variable.

C) Add dummy variables to the regression.

土豆妮

A variable is regressed against three other variables, x, y, and z. Which of the following would NOT be an indication of multicollinearity? X is closely related to:

A) 3y + 2z.

B) 3.

C) y2.

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If x is related to y², the relationship between x and y is not linear, so multicollinearity does not exist. If x is equal to a constant (3), it will be correlated with the intercept term.

土豆妮

An analyst is testing to see whether a dependent variable is related to three independent variables. He finds that two of the independent variables are correlated with each other, but that the correlation is spurious. Which of the following is most accurate? There is:

A) no evidence of multicollinearity and serial correlation.

B) evidence of multicollinearity and serial correlation.

C) evidence of multicollinearity but not serial correlation.

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Just because the correlation is spurious, does not mean the problem of multicollinearity will go away. However, there is no evidence of serial correlation.

土豆妮

A variable is regressed against three other variables, x, y, and z. Which of the following would NOT be an indication of multicollinearity? X is closely related to:

A) 3y + 2z.

B) 3.

C) y2.