Question

) In the case of perfect multicollinearity, OLS is unable to estimate the slope coefficients of...

) In the case of perfect multicollinearity, OLS is unable to estimate the slope coefficients of the variables involved. Assume that you have included both X1 and X2 as explanatory variables, and that X2 = 2 X1 , so that there is an exact relationship between two explanatory variables. Does this pose a problem for estimation? Why or why not? Also, explain what perfect multicollinearity is and why it is problematic in general in your answer.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Perfect multicollinearity exists when there is an exact linear relationship between two or more variables.

Imperfect multicollinearity exists where there is a linear relationship between two or more variables with some error term involved.

X2 = 2 X1, this will cause a problem in the estimation as the perfect collinearity between X2 and X1 would make the estimation of both difficult. The standard errors become infinite and no structural inferences can be drawn.

Perfect multicollinearity is problematic because it makes the estimators indeterminate. OLS estimation would, therefore, go for a toss.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Question 1 Suppose you estimate the following regression function where Y, X1, and X2 are continuous...
Question 1 Suppose you estimate the following regression function where Y, X1, and X2 are continuous variables measured in integers: Yhat=0.5+0.25*X1 −0.01*X2−0.43*X
3 Suppose that X2=X1*X1 The standard error of beta0hat is 0.10. The standard error of beta1hat is 0.05. The standard error of beta2hat is 0.005. The standard error of beta3hat is 0.05. What is the marginal effect of X1 when it increases from 3 to 4? Round to two decimal places. 10 points Question 2 Refer to question...
1.    In a multiple regression model, the following coefficients were obtained: b0 = -10      b1 =...
1.    In a multiple regression model, the following coefficients were obtained: b0 = -10      b1 = 4.5     b2 = -6.0 a.    Write the equation of the estimated multiple regression model. (3 pts) b     Suppose a sample of 25 observations produces this result, SSE = 480. What is the estimated standard error of the estimate? (5 pts) 2.    Consider the following estimated sample regression equation: Y = 12 + 6X1 -- 3 X2 Determine which of the following statements are true,...
1. Consider the general form of the utility for goods that are perfect complements. a) Why...
1. Consider the general form of the utility for goods that are perfect complements. a) Why won’t our equations for finding an interior solution to the consumer’s problem work for this kind of utility? Draw(but do not submit) a picture and explain why (4, 16) is the utility maximizing point if the utility is U(x, y) = min(2x, y/2), the income is $52, the price of x is $5 and the price of y is $2. From this picture and...
Hi! Below is the case study and I want to make sure I'm on the right...
Hi! Below is the case study and I want to make sure I'm on the right track. I bolded the questions I'm interested in (1-5). Looking for people who are familiar with the DSM-5/abnormal psychology and able to answer all questions completely. Thank you! Questions: 1. Diagnosis; what is the evidence for it? 2. Treatment; typical treatment used for this diagnosis AND most effective treatment. IF the person is in treatment, what should we target first in terms of symptoms?...
9.11 Table C.13 Anorexia data Ben-Tovim et al. (1979) report a case-control study to test hypothesis...
9.11 Table C.13 Anorexia data Ben-Tovim et al. (1979) report a case-control study to test hypothesis that anorexic people tend to overestimate their true waist measurements.Eight anorexic women were identified from a hospital in-patient unit and compared with 11 non-anorexic adolescent schoolgirls. The outcome variable used to compare cases and controls was the body perception index, BPI = 100 * (perceived waistwidth)/ (true waist width) The data collected were as follows: Subject number Waist width (cm) Cases True Perceived BPI...
CASE STUDY " POUND CAKE FILLING AUTOMATION" THE INTRODUCTION The filling process for pound cakes at...
CASE STUDY " POUND CAKE FILLING AUTOMATION" THE INTRODUCTION The filling process for pound cakes at the Talerico-Martin Bakery was daunting, time consuming, and had many imperfections. Consumer demand for the product was also continuing to rise. This caused a problem for the bakery that needed to be solved. The options were to increase the operations up to 24 hour shifts for the pound cake lines instead of the 8 or 16 hour shifts the bakery currently used, or find...
READ THE CASE STUDY AND ANSWER THE FOLLOWING QUESTIONS 2nd CASE: An Unexplained Death A 65-year-old...
READ THE CASE STUDY AND ANSWER THE FOLLOWING QUESTIONS 2nd CASE: An Unexplained Death A 65-year-old man of Scandinavian descent was rushed to the Emergency Room of your local hospital after a family member discovered him unconscious in his home. The woman who dialed “911” told the dispatcher that the man, her brother, was the local librarian of the past 10 years and had no spouse or children. She reported that they had spoken the day before, and he had...
Case Challenge #1 (Please do not attempt to solve if you can not answer all) A...
Case Challenge #1 (Please do not attempt to solve if you can not answer all) A New, Dynamic Industry THE ENERGY BAR INDUSTRY In 1986, PowerBar, a firm in Berkeley, California, single-handedly created the energy bar category. Positioned as an athletic energy food, it was distributed at bike shops and events that usually involved running or biking. The target segment was the athlete who needed an efficient, effective energy source. Six years later, seeking to provide an alternative to the...
I'm working in a 6 page research paper and below is the complete list of the...
I'm working in a 6 page research paper and below is the complete list of the paper has to be set up and the required things needed to be included. Can you check to see what is already included on the list and what is missing in my paper. Also, what I need to improve and how? My topic is "The Struggles of Epilepsy". Can you help me with the content (background, empirical research, and hypothesis )? I also need...
Outline and answer all discussion questions following case description in details. (Do not attempt to solve...
Outline and answer all discussion questions following case description in details. (Do not attempt to solve if you can not fulfill all the requirements!!!!) THE ENERGY BAR INDUSTRY In 1986, PowerBar, a firm in Berkeley, California, single-handedly created the energy bar category. Positioned as an athletic energy food, it was distributed at bike shops and events that usually involved running or biking. The target segment was the athlete who needed an efficient, effective energy source. Six years later, seeking to...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT