ANALYSIS OF COLLINEAR DATA
Interpretation of the multiple regression equation depends implicitly on the assumption that the predictor variables are not strongly interrelated. It is usual to interpret a regression coefficient as measuring the change in the response variable when the corresponding predictor variable is increased by one unit and all other predictor variables are held constant. This interpretation may not be valid if there are strong linear relationships among the predictor variables. It is always conceptually possible to increase the value of one variable in an estimated regression equation while holding the others constant. However, there may be no information about the result of such a manipulation in the estimation data. Moreover, it may be impossible to change one variable while holding all others constant in the process being studied. When these conditions exist, simple interpretation of the regression coefficient as a marginal effect is lost.
When there is a complete absence of linear relationship among the predictor variables, they are said to be orthogonal. In most regression applications the predictor variables are not orthogonal. Usually, the lack of orthogonality is not serious enough to affect the analysis. However, in some situations the predictor variables are so strongly interrelated that the regression results are ambiguous. Typically, it is impossible to estimate the unique effects of individual variables in the regression ...