Using Transformation to Reduce Multicolinearity

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Using Transformation to Reduce Multicolinearity

• The multicolinearity can be reduced by modifying
  the original predictor variables.
• Define new variables

Income Income - average income Age Age -
average Age
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Using Transformation to Reduce Multicolinearity
Income Income - 24.2
Age Age - 8.392
Modified data
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Regression results of the modified model
Multicolinearity is not a problem anymore
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