Multi-collinearity, Managerial Accounting

Assignment Help:

Multi-collinearity

Multiple regression analysis is based on the assumption that the independent variables are not correlated with each other, whenever the independent variables are highly correlated with each other then it is very difficult to isolate the effect of each one of these on the dependent variables. This occurs when there is a simultaneous movement of two or more independent variables in the same direction and almost at the same time. This condition is called multi-collinearity.

We can use the correlation matrix to determine whether 2 independent variables are highly correlated. If a correlation value of more than 0.8 exists between two independent variables, then the problem of multi-colinearity is bound to occur. Alternatively if the correlation coefficient between the two variables is greater than the multiple correlation coefficients, then multi-colinearity problem will occur. To remove the problem of multi-colinearlity, we drop one of the correlated variables. You can drop any of the variables.


Related Discussions:- Multi-collinearity

What are the principles of management accounting, What are the Principles o...

What are the Principles of management accounting? 1. The procedures and methods to be followed for keeping and analyzing financial statements should have consistency. It enable

Budget, advantage and disadvantage of incremental budget

advantage and disadvantage of incremental budget

Financial manager''s role in inventory management, Financial manager's role...

Financial manager's role in inventory management The techniques of inventory management are very useful in determining the optimum level of inventory and finding answers to the

Explain the cost oriental pricing policy, Cost oriental pricing policy ...

Cost oriental pricing policy Cost of production of a product is the most important variable and most important determinant of its price. There may type of costs such as-fixe

Estimate the labor cost, The Knapp Company needs to predict the labor cost ...

The Knapp Company needs to predict the labor cost in producing small carrot patch dolls. The following production information is available: Year Dolls Pr

Material control, MATERIAL CONTROL It is said that "any fool can sell"—...

MATERIAL CONTROL It is said that "any fool can sell"—it is buying at the right price that is more critical to the achievement of a satisfactory return on capital employed.  Buy

Consulting project, CONSULTING PROJECT Pricing and Production Decision...

CONSULTING PROJECT Pricing and Production Decisions at PoolOut Ltd  PoolOut Ltd manufactures and sells a single product called the "RainIn", which is a patent-protected au

Functions of the treasury department, The significant functions of a treasu...

The significant functions of a treasury department are as given below: a) Setting up corporate financial goals Financial strategies and aim Treasury and financial po

Describe breadth indicators and market sentiment indicators, Describe bread...

Describe breadth indicators and market sentiment indicators? 1. Distinguish among technical and fundamental analysis. As well explain essential concepts underlying chart analys

Why is the activity based costing unaccepable for ex, Ask question #Miwhy i...

Ask question #Miwhy is the activity based costing unaccepable for external financial reportnimum 100 words accepted#

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd