Which of the following statements is true?
A) Dummy variables are used to incorporate categorical variables into a regression model.
B) You should use one fewer dummy variables than are categories for the qualitative variable in question.
C) It is appropriate to compute a correlation coefficient for the relationship between a dependent variable and a dummy variable.
D) All of the above are true.

Question

Quizplus · Accepted Answer

All statements are true regarding the use of dummy variables in regression analysis. Dummy variables allow for the inclusion of categorical data in regression models (A), to avoid multicollinearity, one less than the total number of categories is used (B), and it is possible to compute a correlation coefficient between a dependent variable and a dummy variable to understand their relationship (C).

Which of the Following Statements Is True