DEFINITION of '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.
INVESTOPEDIA EXPLAINS '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.

Variance
The spread between numbers in a data set, measuring Variance ... 
Multicollinearity
In statistics, the occurrence of several independent variables ... 
Statistics
A type of mathematical analysis involving the use of quantified ... 
Variance Swap
A type of volatility swap where the payout is linear to variance ... 
Analysis Of Variance  ANOVA
A statistical analysis tool that separates the total variability ... 
Correlation
In the world of finance, a statistical measure of how two securities ...

What is the difference between a simple random sample and a stratified random sample?
Simple random samples and stratified random samples differ in how the sample is drawn from the overall population of data. ... Read Full Answer >> 
What are the advantages and disadvantages of using systematic sampling?
As a statistical sampling method, systematic sampling is simpler and more straightforward than random sampling. It can also ... Read Full Answer >> 
What is the difference between the standard error of means and standard deviation?
The standard deviation, or SD, measures the amount of variability or dispersion for a subject set of data from the mean, ... Read Full Answer >> 
What level of correlation among investments will guarantee market returns but have ...
The efficient frontier set forth by modern portfolio theory (MPT) can provide an estimate of an optimal portfolio that allows ... Read Full Answer >> 
What is a "non linear" exposure in Value at Risk (VaR)?
The value at risk (VaR) is a statistical risk management technique that determines the amount of financial risk associated ... Read Full Answer >> 
What are some examples of positive correlation in economics?
Positive correlation exists when two variables move in the same direction. A basic example of positive correlation is height ... Read Full Answer >>

Investing Basics
Regression Basics For Business Analysis
This tool is easy to use and can provide valuable information on financial analysis and forecasting. Find out how. 
Bonds & Fixed Income
Find The Highest Returns With The Sharpe Ratio
Learn how to follow the efficient frontier to increase your chances of successful investing. 
Active Trading Fundamentals
How To Convert Value At Risk To Different Time Periods
Volatility is not the only way to measure risk. Learn about the "new science of risk management". 
Options & Futures
An Introduction To Value at Risk (VAR)
Volatility is not the only way to measure risk. Learn about the "new science of risk management". 
Active Trading
Modern Portfolio Theory: Why It's Still Hip
See why investors today still follow this old set of principles that reduce risk and increase returns through diversification. 
Fundamental Analysis
What is Quantitative Analysis?
Quantitative analysis refers to the use of mathematical computations to analyze markets and investments. 
Fundamental Analysis
Understanding the Simple Random Sample
A simple random sample is a subset of a statistical population in which each member of the subset has an equal probability of being chosen. 
Economics
What is Systematic Sampling?
Systematic sampling is similar to random sampling, but it uses a pattern for the selection of the sample. 
Fundamental Analysis
Explaining Expected Return
The expected return is a tool used to determine whether or not an investment has a positive or negative average net outcome. 
Fundamental Analysis
Explaining the Geometric Mean
The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio.