ECON 2P91 Lecture Notes - Multicollinearity, Scatter Plot, Autonomous Soviet Socialist Republics Of The Soviet Union
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Note: a total of (k+1) parameters needs to be estimated; hence, the number of degrees of freedom is n-(k+1). y i x x x b b b b i. 2 i y i x x b b i. 0 ki b b x u b is the intercept i. e. the value of the dependent variable when all b. Independent variables are zero b coefficient for x2 meaning that it indicates the effect of a 1-unit change in x2 on the dependent variable (y), holding constant all the other independent variables (x3,x4, In econometrics, holding constant (x3,x4, ,xk) is also referred to as controlling for (x3,x4, ,xk). are partial slope coefficients. Violation of this assumption is called heteroskedasticity i. e. var xx (non-constant value) i i. Perfect multicollinearity suggests that a scatterplot of any pair of independent variables lies on a straight line. If there is perfect multicollinearity, it is impossible to obtain ols estimates.