{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

ECON301_Handout_10_1213_02

You can use changes instead of levels the advantage

Info iconThis preview shows pages 17–18. Sign up to view the full content.

View Full Document Right Arrow Icon
You can use “ changes” instead of “ levels” . The advantage is that “changes” may not be as highly correlated as their “levels”. 6. Other methods of remedying multicollinearity. Multivariate statistical techniques such as factor analysis and principal components or techniques such as ridge regression are also employed to “solve” the problem of multicollinearity.
Background image of page 17

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
ECON 301 - Introduction to Econometrics I May 2013 METU - Department of Economics Instructor: Dr. Ozan ERUYGUR e-mail: [email protected] Lecture Notes 18 5. Summary The effects of multicollinearity and the means of identifying them are summarized below: Estimates of parameters are still unbiased, consistent, and BLUE. The standard errors of the coefficients might be high, making individual coefficients insignificant. The model might exhibit high R 2 but low t -values: A joint F-test might reject the null hypothesis that several coefficients are zero, but individual t -tests might accept them, leading to an apparent contradiction. Coefficients may change considerably when variables are added or deleted, thus making the interpretation of individual coefficients difficult.
Background image of page 18
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page17 / 18

You can use changes instead of levels The advantage is that...

This preview shows document pages 17 - 18. Sign up to view the full document.

View Full Document Right Arrow Icon bookmark
Ask a homework question - tutors are online