A high value of the coefficient of determination significantly above 0 in multiple regression,accompanied by insignificant t-statistics on all parameter estimates,very often indicates a high correlation between independent variables in the model.

Question

Quizplus · Accepted Answer

A high coefficient of determination (R-squared) indicates that a large percentage of the variation in the dependent variable is explained by the independent variables in the model. However, if the t-statistics on all parameter estimates are insignificant, it suggests that none of the independent variables are contributing significantly to the model. This can be an indication of multicollinearity, where the independent variables are highly correlated with each other and are jointly explaining the variation in the dependent variable.

A High Value of the Coefficient of Determination Significantly Above