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Covariance

Introduction:

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Correlation

Introduction:

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Multicollinearity

Introduction:

Remedies for multicollinearity

1. Drop one of the variables. An explanatory variable may be dropped to produce a model with significant coefficients. However, you lose information (because you’ve dropped a variable). Omission of a relevant variable results in biased coefficient estimates for the remaining explanatory variables that are correlated with the dropped variable.

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