## Lesson 7: Multicollinearity and Interaction Variables

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