Chap15-SSM

# Chap15-SSM - 378 Chapter 15 Multiple Regression Model...

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Study Guide and Student’s Solutions Manual 379 ± The dependent variable is i Y and the independent variable is 1 i X . Transformed multiplicative model: ± 01 1 log log log log log ii k k i i YX X β ββ ε =+ + + + L ± The dependent variable is log i Y and the independent variables are 1 log i X , 2 log i X , etc. Transformed exponential model: ± 1 ln ln k k i i X + + + L ± The dependent variable is ln i Y and the independent variables are 1 i X , 2 i X , etc. Collinearity Some of the explanatory variables are highly correlated with each other. The collinear variables do not provide new information and it becomes difficult to separate the effect of such variables on the dependent variable. Y X 1 X 2 Large Overlap Overlap in variation of X 1 and X 2 is used in explaining the variation in Y but NOT in estimating and 1 2 Large Overlap Overlap reflects collinearity between X 1 and X 2 The values of the regression coefficient for the correlated variables may fluctuate drastically depending on which independent variables are included in the model.
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Chap15-SSM - 378 Chapter 15 Multiple Regression Model...

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