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 cause problems with regression analysis, as it can make it difficult to determine the individual effects of each variable. 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 them can be dropped from the model.

What Should We Do When We Have Multicollinearity