Lesson 7: Multicollinearity and Interaction Variables
February 22, 2024
Review:
- MLB Regression Model
Presentation:
- Multicollinearity
- Demonstrate with Sample Real Estate data
- Definition
- Mitigation Strategies
- choose the best single representative variable, or
- combine correlated variables
- Interaction Variables
- combine separate variables, mathematically
- add, multiply, divide – just about anything is fair game
Activity:
- Use this larger Pueblo real estate data set
- Build a regression model to estimate selling price
- Test interaction variables
- Experiment with multiple combinations to find the best model, maximizing R^2 and F
Assignment:
- Use this used vehicle sales data set
- Build a regression model to estimate selling price
- Test interaction variables
- Experiment with multiple combinations to find the best model, maximizing R^2 and F