From the course: Machine Learning & AI Foundations: Linear Regression

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Creating and testing interaction terms

Creating and testing interaction terms - SPSS Tutorial

From the course: Machine Learning & AI Foundations: Linear Regression

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Creating and testing interaction terms

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- [Instructor] Okay, so here we are in the M.W. Bank data set and we know that we have an interaction, but what action should we now take? Well, what we're gonna have to do is create an interaction term. Since education and sex are the two variables that are interacting, what you have to do, and this might surprise you at first, just create a new variable that is the product. Literally multiplying education times sex. So let's walk through the process, but there's one step that we have to do in addition. What's gonna happen is when we have this education times sex variable, it is certain to be highly, highly correlated with the education variable, and that's gonna cause multicollinearity. So academics differ a bit on how to tackle this, but the classic approach is called centering, which I'm about to show you. And if you want it to do a deeper dive into the theory behind centering, you could read about it in Aiken and West's book "Multiple Regression: Testing "and Interpreting…

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