- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 3. Model Misspecification
- Subject 4. Multicollinearity
CFA Practice Question
Multicollinearity in linear regression is caused by:
II. The dependent variable and an independent variable being highly correlated with each other.
III. Two or more dependent variables being highly correlated with each other.
IV. Two or more independent variables being highly correlated with each other.
I. Heteroskedastic and serially correlated residuals.
II. The dependent variable and an independent variable being highly correlated with each other.
III. Two or more dependent variables being highly correlated with each other.
IV. Two or more independent variables being highly correlated with each other.
Correct Answer: IV
Multicollinearity in linear regression is caused by two or more independent variables (or linear combinations of independent variables) being highly correlated with each other.
User Contributed Comments 1
| User | Comment |
|---|---|
| danlan2 | This is the definition |