Multicollinearity (WEDC)
What is it?
- Two or more independent variables are correlated.
Effect?
- Coefficients are consistent (but unreliable).
- Standard errors are overestimated.
- Too many Type II errors
Detection?
- Conflicting t and F statistics; correlations among independent variables if K=2
Correction?
- Drop one of the correlated variables
Advertisements
Leave a Comment