Definition
In statistics, the variance inflation factor is the ratio of variance in a model with multiple terms, divided by the variance of a model with one term alone. It quantifies the severity of multicollinearity in an ordinary least squares regression analysis. It provides an index that measures how much the variance of an estimated regression coefficient is increased because of collinearity.
Variance Inflation Factor
What is ‘Variance Inflation Factor’
A measure of the amount of multicollinearity in a set of multiple regression variables. The presence of multicollinearity within the set of independent variables can cause a number of problems in the understanding the significance of individual independent variables in the regression model. Using variance inflation factors helps to identify multicollinearity issues so that the model can be adjusted.
Explaining ‘Variance Inflation Factor’
The variance inflation factor allows a quick measure of how much a variable is contributing to the standard error in the regression. When significant multicollinearity issues exist, the variance inflation factor will be very large for the variables involved. After these variables are identified, there are several approaches that can be used to eliminate or combine collinear variables, resolving the multicollinearity issue.
Further Reading
- Model-dependent variance inflation factor cutoff values – www.tandfonline.com [PDF]
- Collinearity: revisiting the variance inflation factor in ridge regression – www.tandfonline.com [PDF]
- Variance inflation factor and condition number in multiple linear regression – www.tandfonline.com [PDF]
- Extracting the variance inflation factor and other multicollinearity diagnostics from typical regression results – www.tandfonline.com [PDF]
- Collinearity diagnostic applied in ridge estimation through the variance inflation factor – www.tandfonline.com [PDF]
- Green purchasing frameworks considering firm size: a multicollinearity analysis using variance inflation factor – www.tandfonline.com [PDF]
- The corrected vif (cvif) – www.tandfonline.com [PDF]
- Response surface designs using the generalized variance inflation factors – www.tandfonline.com [PDF]
