Multiple Regression

Question 1

If R²=0 then the explanatory value of…

Answer 1

X and all ß =0

Question 2

If R²=0 then Y=

Answer 2

Π+ e

(restricted model)

Question 3

If f value greater than critical value…

Answer 3

reject R²=0

Question 4

Explain the effect of an individual ß on Y in a multiple regression

Answer 4

As in MR ßj=[d]y/[d]x

ßj= the marginal difference of Xj to Y holding all other explanatory variables constant

Question 5

Pitfalls of using simple regression in multiple regression context

Answer 5

Coefficients dispersed from true value as the singular explanatory variable acts as a proxy for other variables when ceterus paribus is not maintained (ommited variable bias)

Question 6

How to decide which X values to include? (2)

Answer 6

Run a t-test on potential explanatory variables to determine relevancy

If they are significant include them

Question 7

What is multicoliarity?

Answer 7

When two or more explanatory variables are correlated

Question 8

The test for multicoliniarity?

Answer 8

Correlation matrix