In a given week,the TSE (Toronto Stock Exchange)is generally open from Monday through Friday.If we wanted to use multiple regression method with dummy variables to study the impact of the day of the week on stock market performance,we would need ____ dummy variables.
A)5
B)52
C)4
D)3
E)365

Question

Quizplus · Accepted Answer

There are five weekdays in a week, but we only need n-1 dummy variables to avoid correlation and overfitting. Therefore, we need 4 (5-1) dummy variables to study the impact of the day of the week on stock market performance.

In a Given Week,the TSE (Toronto Stock Exchange)is Generally Open