In a case where there is multicollinearity in the model
A) Independent variables have strong linear relationships with each other
B) The variance of the estimates increases when we have multicollinearity.
C) Multicollinearity will lead to bias.
D) Both A and B
E) Both A and C

Question

Quizplus · Accepted Answer

Multicollinearity occurs when independent variables in a regression model are highly correlated. This does not lead to bias in the coefficient estimates, but it does increase their variances, making statistical tests less reliable.

In a Case Where There Is Multicollinearity in the Model