Continuing with the preceding problem, if there is severe collinearity, which variable would you drop and why?

Question:

Continuing with the preceding problem, if there is severe collinearity, which variable would you drop and why? If you drop one or more X variables, what type of error are you likely to commit?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Essentials of Econometrics

ISBN: 978-0073375847

4th edition

Authors: Damodar Gujarati, Dawn Porter

See More Books

Question Posted: Apr 12, 2016 07:30 AM

See More Questions

You are given the hypothetical data in Table 8-6 on weekly consumption expenditure (Y), weekly income (X2), and wealth (X3), all in dollars. a. Do an OLS regression of Y on X2 and X3. b. Is there...
Continue with the preceding problem but now assume that Di = 2 for female = 1 for male With this dummy scheme re-estimate regression (6.1) using the data of Table 6-2 and compare your results. What...
Given the following regression output, Answer the following questions: a. Write the regression equation. b. If x1 is 4 and x2 is 11, what is the expected or predicted value of the dependent variable?...
As a security architect for a medium-sized firm, briefly describe how would you approach the following case problems: 1. Sending encrypted email to third parties. 2. Encrypting sensitive data inside...
Quattro Technologies, a hydraulic manufacturer in the aeronautics industry, has reported steadily increasing earnings over the past few years. The company reported net income of $120 million in 2013...
A system comprising of single phase is known as: (a) Open system (b) Closed system (c) Homogeneous system (d) Heterogeneous system
The following system of differential equations arises in the modeling of a stirred tank reactor with an autocatalyic reaction: \[\begin{aligned}& \frac{d x}{d t}=x-x y \\& \frac{d y}{d t}=-y+x...
After Jack purchases his phone and data plan, is it likely that he experienced cognitive dissonance with his purchase? What evidence makes you answer the way you did?
Current Attempt in Progress Larkspur presented the following data. Net income $5,551,000 Bonds: 10%, $715,000 par value 703,000 Preferred stock: 108,000 shares outstanding. $100 par, 9% cumulative,...
Demand for Quiggly Pops follows an up and down pattern over the four quarters of a year, with peaks in the spring and winter months when special promotions are held. Production is handled by a highly...
If there is collinearity in Problem 8.14, estimate the various auxiliary regressions and find out which of the X variables are highly collinear. Problem 8.14 You are given the annual data in Table...
After eliminating one or more X variables, what is your final demand function for passenger cars? In what ways is this "final" model better than the initial model that includes all X variables?
(CMA, adapted) Roletter Company makes and sells artistic frames for pictures of weddings, graduations, and other special events. Bob Anderson, the controller, is responsible for preparing Roletters...
Explain At least one communication challenge for each element and strategies you might use to overcome this problem. Elements of Culture Explain possible communication challenge Communication...
Activity-Communication Gone Bad Think about three incidents in your personal or business experience, where communication between yourself and other people didn't go well. Reflect upon three different...
This is a negotiation between Tracy and Pat for the sale of a beautiful, old Victorian house with wood siding on a large lot in a residential neighborhood. The house needs expensive repairs. The...
An important element in carrying out a feasibility study is determining the criteria by which to judge each option. For each of the following topics, list five necessary criteria and five desirable...
ANSWER THE FOLLOWING QUESTIONS IN OWN WORDS NOT FROM ANY OTHER INTERNET SOURCES, GIVE LONG EXPLANATIONS FOR EACH ANSWER. Read the case: Smile Again! Applying Design Thinking to Improve Dental...
The following accounts appear in an adjusted trial balance of F-18 Consulting. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and equipment; (c)...
Define deferred revenue. Why is it a liability?
Consider a linear probability model for whether employers offer a pension plan based on the percentage of workers belonging to a union, as well as other factors: pension = 0 + 1percunion + 2avgage +...
For a large university, you are asked to estimate the demand for tickets to women's basketball games. You can collect time series data over 10 seasons, for a total of about 150 observations. One...
How big is the effect of per-student school expenditures on local housing values? Let HPRICE be the median housing price in a school district and let EXPEND be per-student expenditures. Using panel...
Solve (2.4 x 10-5) X 875 (2.5 x 107) x (2.8 x 107)
assume there are no outliers. Draw the boxplot for the following frequency table. You may X f rf cf crf 3 7 0.1228 7 0.1228 4 11 0.1930 18 0.3158 5 9 0.1579 27 0.4737 618 6 0.1053 33 0.5789 10 0.1754...
Find the partial derivative of the regularized least squares problem: {) (w + x) (wo + w x ( ) + w x ( ) } + |/\||[w1, w2]|| with respect to wo, w, and w2. Although there is a closed-form solution to...

Continuing with the preceding problem, if there is severe collinearity, which variable would you drop and why?

Question:

Step by Step Answer:

The simple correlation matrix of the natural logs of the X variables is In X 2t In X 3...View the full answer

Essentials of Econometrics

Students also viewed these Econometric questions