Question

What is a typical symptom of multicollinearity in linear regressions?

(i) A statistically insignificant F-test for the estimated model

(ii) Statistically insignificant t-tests for some of the coefficients

(iii) A significant F-test for the model and significant coefficients.

Answer 1

Solution:

Multicollinearity occurs when the independent variables are highly correlated with each other.

The F-test of overall significance indicates whether the linear regression model provides a better fit to the data than a model that contains no independent variables.

F- tests can evaluate multiple models simultaneously, which is useful in order to compare the fits of different linear models.

Therefore, A significant F-test for the model and significant coefficients is the is a typical symptom of multicollinearity in linear regressions.

Thus Option (iii) is correct.