If an analyst is regressing individual independent variables on all other independent variables of a regression model,he or she is testing for:
A)specification bias.
B)sampling error.
C)heteroscedasticity.
D)multicollinearity.

Question

Quizplus · Accepted Answer

Regressing individual independent variables against all other independent variables in a regression model is known as calculating the Variance Inflation Factor (VIF) or performing a multicollinearity test. This test is used to identify multicollinearity, which occurs when two or more independent variables in a regression model are highly correlated with each other. This can lead to unreliable coefficient estimates and difficulties in interpreting the model. Therefore, the analyst is testing for multicollinearity by running this type of regression.

If an Analyst Is Regressing Individual Independent Variables on All