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Effects of Multicollinearity in Logit Model  

Ryu, Si-Kyun (경기개발연구원)
Publication Information
Journal of Korean Society of Transportation / v.26, no.1, 2008 , pp. 113-126 More about this Journal
Abstract
This research aims to explore the effects of multicollinearity on the reliability and goodness of fit of logit model. To investigate the effects of multicollinearity on the multinominal logit model, numerical experiments are performed. The exploratory variables(attributes of utility functions) which have a certain degree of correlations from (rho=) 0.0 to (rho=) 0.9 are generated and rho-squares and t-statistics which are the indices of goodness of fit and reliability of logit model are traced. From the well designed numerical experiments, following findings are validated : 1) When a new exploratory variable is added, some of rho-squares increase while the others decrease. 2) The higher relations between generic variables lead a logit model worse with respect to goodness of fit. 3) Multicollinearity has a tendency to produce over-evaluated parameters. 4) The reliability of the estimated parameter has a tendency to decrease when the correlations between attributes are high. These results suggest that we have to examine the existence of multicollinearity and perform the proper treatments to diminish multicollinearity when we develop logit model.
Keywords
Logit Model; Multicollinearity; Numerical Experiments; Reliability of Logit; Fitness of Logit;
Citations & Related Records
Times Cited By KSCI : 5  (Citation Analysis)
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