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    Question

    Calculate the value of VIF in case of Multicollinearity,

    if the Ri2(Coefficient of auxiliary regression on independent variables) is 0.60 and the variance of the OLS estimator is 2.
    A 5.00 Correct Answer Incorrect Answer
    B 1.60 Correct Answer Incorrect Answer
    C 1.25 Correct Answer Incorrect Answer
    D 2.5 Correct Answer Incorrect Answer

    Solution

    VIF= 1/ (1-Ri2) = 1/ (1-0.6) = 1/0.4 = 2.5

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