Understanding Multicollinearity in Regression Analysis

Very Easy Multiple Regression Analysis Multicollinearity

In a multiple regression analysis, a researcher investigates the relationship between a dependent variable, $Y$, and two independent variables, $X_1$ and $X_2$. The researcher notes that the correlation coefficient between $X_1$ and $X_2$ is very high, leading to concerns about multicollinearity.

Which of the following statements about multicollinearity is true?

Multicollinearity increases the estimates of the regression coefficients.

Multicollinearity can lead to inflated standard errors of the coefficients.

Multicollinearity ensures that the coefficients of the independent variables are unbiased.

Hint

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