The regression coefficients for two independent variables that are very strongly related to one another may not be very stable. This regression problem is referred to as
A) dummy variables
B) heteroscedasticity
C) multicollinearity
D) serial correlation

Question

Quizplus · Accepted Answer

Multicollinearity occurs when two or more independent variables in a regression model are highly correlated with each other. This causes instability in the regression coefficients and makes it difficult to determine the individual effects of each independent variable on the dependent variable. Therefore, option C is the correct answer. Dummy variables are used to represent categorical variables. Heteroscedasticity refers to unequal variance in the errors of a regression model. Serial correlation occurs when the errors in a regression model are correlated with each other.

The Regression Coefficients for Two Independent Variables That Are Very