What Should We Do When We Have Multicollinearity

question 4

Multiple Choice

What should we do when we have multicollinearity?

• A) Ignore it no matter what.
• B) Drop some of the independent variables.
• C) Consider testing whether the highly collinear variables are jointly significant.
• D) Add more independent variables in order to reduce multicollinearity.

---

Definitions:

Sole Proprietors

A sole proprietorship is a type of enterprise that is owned and run by one person and in which there is no legal distinction between the owner and the business entity.

Limited Liability

The legal principle that limits each owner's financial loss to the amount of money that individual has invested in a company.

Partnership Name

The official legal name under which a partnership business operates and is recognized.

Both Partners

In the context of business or law, it refers to the mutual and joint responsibility or involvement of two parties in an agreement or venture.