The problem of multicollinearity arises when:
A) the dependent variables are highly correlated with one another
B) the independent variables are highly correlated with one another
C) the independent variables are highly correlated with the dependent variable
D) the independent variables are not correlated with each other
E) none of these

Question

Quizplus · Accepted Answer

Multicollinearity occurs when independent variables in a regression model are highly correlated with each other. This can lead to unstable and unreliable coefficient estimates and make it difficult to isolate the effect of each independent variable on the dependent variable.

The Problem of Multicollinearity Arises When