Which of the following statements is true?
A) It is appropriate to compute a correlation coefficient for the relationship between a dummy variable and a dependent variable.
B) If a qualitative variable has m categories, you should use m - 1 dummy variables to incorporate the qualitative variable into a regression model.
C) Dummy variables are used to incorporate qualitative variables into a regression model.
D) All of these.
E) None of these.

Question

Quizplus · Accepted Answer

A) It is appropriate to compute a correlation coefficient for the relationship between a dummy variable and a dependent variable. This statement is true as correlation coefficient measures the extent of the linear relationship between two variables.

B) If a qualitative variable has m categories, you should use m - 1 dummy variables to incorporate the qualitative variable into a regression model. This statement is also true as using m-1 dummy variables captures the complete information about the qualitative variable, and the additional dummy variable is captured in the constant term.

C) Dummy variables are used to incorporate qualitative variables into a regression model. This statement is also true as the qualitative variables are incorporated into regression models using dummy variables.

Therefore, the correct choice is D, i.e., all of these statements are true.

Which of the Following Statements Is True