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Nov 8, 2010 9:19 AM
(495 views)

Thanks.

4 REPLIES

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Nov 8, 2010 9:37 AM
(224 views)

It means that you can't interpret the individual estimates by themselves. The prediction model is still fine, just the estimates are not easily interpretable.

If, for example, beta1 is estimated to be 3 and beta2 is estimated to be 1, then you canNOT say that a one unit change in x1 results in a 3 unit change in Y, because x1 and x2 are correlated, so when x1 changes by 1 unit, x2 is also changing.

What can be done? Remove one (or more) of the highly correlated X's from the model, and adjust your mindset to use the prediction model without trying to interpret the coefficients.

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Nov 8, 2010 9:53 AM
(224 views)

Thanks a lot.

Can you give me rough numbers, what high correlation means?

Can you give me rough numbers, what high correlation means?

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Nov 8, 2010 10:53 AM
(224 views)

No, it depends on the situation and the use you are planning to make of the numbers.

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Mar 20, 2012 10:25 AM
(224 views)