When the coefficient of determination is near 1 but the t-statistics are all insignificant,the regression likely suffers from:
A) nonconstant variance of the error terms.
B) multicollinearity.
C) serial correlation.
D) randomness.
E) nonidentifiability.

Question

Quizplus · Accepted Answer

The coefficient of determination (R-squared) near 1 indicates a good fit of the model to the data, meaning that the model explains a large portion of the variation in the dependent variable. However, if the t-statistics are insignificant, it suggests that individual coefficients may not be significant. This is a common symptom of multicollinearity, where the independent variables are highly correlated with each other, making it difficult to determine the separate effects of each variable on the dependent variable. Nonconstant variance of error terms, serial correlation, and randomness are not likely to affect the t-statistics directly, and nonidentifiability is not related to the model fit or significance.

When the Coefficient of Determination Is near 1 but the T-Statistics