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Investments glossary

Variance Inflation Factor

Variance inflation factor (VIF) is a measure of the amount of multicollinearity in a set of multiple regression variables. Mathematically, the VIF for a regression model variable is equal to the ratio of the overall model variance to the variance of a model that includes only that single independent variable. This ratio is calculated for each independent variable. A high VIF indicates that the associated independent variable is highly collinear with the other variables in the model.

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