You are given the following model:

Question

You are given the following model:

Yi = αo + α1X1 + α2X2+ α3X3 + µi.
Where α’s = Coefficients of X’s.
a) What do these regression coefficients mean in this model? Does it make any
difference if the same coefficients are standardized?

Answer 1

The regression coefficients in this model represent the estimated effect of each of the independent variables (X1, X2, and X3) on the dependent variable (Yi). Standardizing the coefficients would not change the meaning of the coefficients, but it would allow for comparison of the relative importance of each of the independent variables. Standardizing the coefficients would also make it easier to compare the results of this model to other models with different scales of measurement.