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

Assignment, What is the fastest time financial accounting assignment can be...

What is the fastest time financial accounting assignment can be done by your company? It will be a report type format but overview type without going into depth.

Explain the features of budgetary control, Explain the Features of budgetar...

Explain the Features of budgetary control From the definition the following features of budgets control emerge: 1) Establishment of budgets: budgets are prepared for each

Illustration of marginal profit, Illustration of Marginal profit To ill...

Illustration of Marginal profit To illustrate the computations, suppose that the marginal profit or XE in our model is changed from 3 to 3 + δ1, where δ represents either posit

Determine how the airline company has grown, From the subsequent financial ...

From the subsequent financial data describe: a) How the airline company has grown-up b) How the company has been capable to earn grater margins at higher levels of sales

Illustration of short-term decisions, Illustration of short-term decisions ...

Illustration of short-term decisions These are, to a significant extent, determined by the excellence of the firm's long-term decisions. Illustration of short-term decisions in

Questions., how long will it take to get answers after question are submitt...

how long will it take to get answers after question are submitted

Advantages-disadvantages-imposed budgets, Advantages of Imposed budgets ...

Advantages of Imposed budgets Advantages: They increase the probability that the organization strategic plans are incorporated into the planned activities. They

Total inventory costs formula , Total inventory costs formula Total in...

Total inventory costs formula Total inventory costs will be as follows: Total inventory costs = Purchase price cost + carrying costs + stock-out cost + order costs. Tota

Standard costing .., the applicability of standard costing in modern manufa...

the applicability of standard costing in modern manufacturing environments in volatile environments

Factory layout-jit features, Factory Layout The first stage of implemen...

Factory Layout The first stage of implementing the JIT manufacturing techniques is to rearrange the factory floor away from the batch production functional layout towards a pro

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