Question

If a group of independent variables are not significant individually but are significant as a group at a specified level of significance, this is most likely due to:

A) the absence of dummy variables.
B) the presence of dummy variables.
C) autocorrelation.
D) collinearity.

Answer 1

D) collinearity

Explanation:

Collinearity occurs when a few of the independent variables are related or match up. Collinearity increases the large proportion the variance of an estimated regression coefficient which leads to certain regression coefficient having wrong signs. It is used to explain the relationship between two variables.