Question

A researcher is studying the effect of 10 different variables on a critical measure of business performance. In selecting the best set of independent variables to predict the dependent variable, the stepwise regression technique is used. How are variables selected for inclusion in the model?

A. Smallest regression coefficient.
B. Largest p-value.
C. Smallest p-value.
D. Highest increase in the multiple R2.

Answer 1

D. Highest increase in the multiple R2.

Explanation:

Included variables in a multiple regression model are those variables which have the most effect on the model ; variables which have no effect on the performance of the model ar discarded. Model performance are based on the variables affect the multiple R² value of the model. The R² value is the coefficient of determination which gives the proportion of change in predicted value based on the regression line. Higher R² value means the variable has greater effect in the model performance. Therefore, variables which have the highest increase on the multiple R² value , are included.