Suppose you're running a multiple regression of Home Prices on five different treatment variables including number of bedrooms, number of bathrooms, total square feet, total lot size, and garage size, where all the treatment variables have been standardized . Which conditions about the multiple regression must hold?
A) Correlation between each of the treatment variables equals 0.
B) Correlation between each of the treatment variables equals 1.
C) Intercept for the multiple linear regression equals the sample average home price.
D) Correlation between the residuals and home price equals 0.

Question

Quizplus · Accepted Answer

DC) When all the treatment variables in a multiple regression have been standardized, the intercept of the regression indeed represents the average value of the dependent variable (in this case, home prices) when all independent variables are at their mean values. This is a property of regression models with standardized predictors.D) In a well-specified regression model, the residuals (the differences between the observed values and the values predicted by the model) should not be correlated with the predicted values (or the actual values) of the dependent variable. If there is a correlation, it suggests that the model is missing some information that explains the dependent variable, which should have been captured by the model.

Suppose You're Running a Multiple Regression of Home Prices on Five