What should we do when we have multicollinearity?
A) Ignore it no matter what.
B) Drop some of the independent variables.
C) Consider testing whether the highly collinear variables are jointly significant.
D) Add more independent variables in order to reduce multicollinearity.

Question

Quizplus · Accepted Answer

Multicollinearity occurs when two or more independent variables are highly correlated. This can make it difficult to interpret the results of a regression analysis, as it can be difficult to determine which independent variables are truly significant. One way to deal with multicollinearity is to consider testing whether the highly collinear variables are jointly significant. If they are not, then one or more of the variables can be dropped from the model.

What Should We Do When We Have Multicollinearity