Multicollinearity Multiple Choice Questions with Answers – PDF Download

MCQ 1: In multicollinearity, due to high variance and standard error, t-test will become statistically:

1. Significant
2. Insignificant
3. Very high
4. Very low

MCQ 2: Closer the value of tolerance to 1, for which there exists:

1. Less chance of multicollinearity
2. High chance of multicollinearity
3. Less chance of perfect multicollinearity
4. High chance of perfect multicollinearity

MCQ 3: As a rule of thumb, multicollinearity exist if the value of VIF exceeds:

1. 5
2. 10
3. 15
4. 20

MCQ 4: There may be a case where you are required x⊂t and x⊂t-1 in the model, which causes:

1. Trending factors
2. Lagged term introduction
3. Model selection biasness
4. Model selection unbiasness

MCQ 5: In VIF calculation, if the value of R² is taken as 0, computed VIF would be equal to:

1. 1
2. 0
3. -1
4. Undefined