Sorry, I was cleaning up the streets-- er, my mock exam wrong answers…

But seriously, this is the question I wrote them about (for a different reason, sort of-- the explanation is still incorrectly stating MC overstates R-squared and the F-test-- probably pretty busy this time of the month). Long story short (there’s a recent thread about it, and an older one), I said MC doesn’t over or understate the F-test or R-squared; the curriculum author agreed…

I think it’s a poorly worded question (still). Given that you have a near perfect correlation between two IV’s you can say collinearity quite possibly an issue (at least) between these two. Given that the t-tests are significant for these two in question, it makes it less condemning, but the sample size isn’t very large (which would help mitigate any MC to an extent)…I think the institute should cover VIFs, which would be another tool in multiple regression for assessing MC.

I think the answer choice regarding explanatory power of the regression is poorly worded for what they are intending to say, making it a possible answer choice. The second regression has a significant F-test, while the first does not (indicating improved model fit, explanatory power of the IVs for the DV). Additionally, the adjusted R-squared is even close to 10 times larger than in the first model. Google the interpretation of R-squared or how you would judge a regression model’s explanatory power-- commonly refers to R-squared (many text books will tell you the same…). Hence, explanatory power of the regression (in terms of the total variation in the DV) has greatly improved (and in a statistically significant way).

The question writer intends for the question to refer to the explanatory power in reference to the relationships between Y and the IVs (can we look at the slope coefficients?). Then, the answer is probably not, because MC is possibly an issue and the effects of the IVs appear to negate one another (this is what I gathered from the responses the Institute gave me). If they change the words “explanatory power” to “explaining the relationships of the DV with the IVs” or something to indicate coefficients, then I would agree with this answer completely-- 2nd regression isn’t better than the first to help us examine the slopes.