Purchase Solution

Explanation of collinearity in multiple regression analysis

Not what you're looking for?

Ask Custom Question

A microeconomist wants to determine how corporate sales are influenced by capital and wage spending by companies. She proceeds to randomly select 26 large corporations and record information in millions of dollars. A statistical analyst discovers that capital spending by corporations has a significant inverse relationship with wage spending. What should the microeconomist who developed this multiple regression model be particularly concerned with?

A. Randomness of error terms
B. Collinearity
C. Normality of residuals
D. Missing observations

Purchase this Solution

Solution Summary

This solution gives a concise explanation of the meaning of collinearity in a multiple regression model. It covers why collinearity is a concern in the particular model described in the problem.

Solution Preview

She should be particularly concerned with collinearity. The regression model the microeconomist is considering has a single dependent or "response" variable (Corporate Sales) and two independent or "explanatory" ...

Purchase this Solution


Free BrainMass Quizzes
Terms and Definitions for Statistics

This quiz covers basic terms and definitions of statistics.

Know Your Statistical Concepts

Each question is a choice-summary multiple choice question that presents you with a statistical concept and then 4 numbered statements. You must decide which (if any) of the numbered statements is/are true as they relate to the statistical concept.

Measures of Central Tendency

Tests knowledge of the three main measures of central tendency, including some simple calculation questions.

Measures of Central Tendency

This quiz evaluates the students understanding of the measures of central tendency seen in statistics. This quiz is specifically designed to incorporate the measures of central tendency as they relate to psychological research.