Refer to Example 7.4. For this problem the correlation matrix is as follows: a. Since the zero-order

Refer to Example 7.4. For this problem the correlation matrix is as follows:

a. €œSince the zero-order correlations are very high, there must be serious multicollinearity.€ Comment.

b. Would you drop variables X²_i and X³_i from the model?

c. If you drop them, what will happen to the value of the coefficient of X_i?

Transcribed Image Text:

X} Xi X; 0.9742 1 0.9284 0.9872 X? 1.0 X} 1.0