Why is it desirable to remove insignificant variables from regression?
Why is it desirable to remove insignificant variables from regression?
Homework Answers
It is undesirable to add insignificant variables in regression equation because:
· The variable is adding nothing to explain the variation in Y
· The estimates of the coefficient will be biased
· There are high chances of multicollinearity in the model
· Variance of the coefficient will increase
· Overall R2 of the regression model will fall
Thus, overall insignificant variables create problems in the regression model analysis and must thus be dropped.
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