Slide môn học Kinh tế lượng: Lecture 3 - Multiple Regression

MULTICOLINEARITY

—Example: X1 - 2 X2 =0

—Definition: X1 and X2 are perfectly multi-collinear if there exists b1, b2 such that:

—b1X1+b2X2 = a ( a: constant)

—at least one of (bi) is non-zero

—X1 and X2 are perfectly multi-collinear iff r(X1, X2) = +/- 1

—X1 and X2 are highly multi-collinear if r(X1, X2) is large

—~X1 and X2 are highly multi-collinear if R2 of the model X1 on (a1, X2) is large