You are interested in examining the factors that influence the amount of stock a person owns.As explanatory variables,you include both the person's income and also the amount of equity they have in their house.Which of the following problems would most likely affect your model?
A)autocorrelation
B)multicollinearity
C)specification bias
D)heteroscedasticity

Question

Quizplus · Accepted Answer

Including both income and equity in house as explanatory variables may lead to multicollinearity, meaning that the two variables may be highly correlated with each other. This can cause problems in model interpretation and estimation.

You Are Interested in Examining the Factors That Influence the Amount