lecture 5 - regression with categorical independent variables

Question 1

what is a dummy variable?

Answer 1

a variable used to represent a categorical variable in a regression model, but represents the categories as binary scores ( 1 or 0)

Question 2

what is the reference or base category?

Answer 2

the category left at the end after all the binary variables have all been created - this is a group without a dummy

Question 3

what does the regression equation look like with multiple Xs and bs?

Answer 3

Y = b1 X1 + b2X2 + u

Question 4

phrases that refer to the usage of multiple bs and Xs to look at the change they have had to the previous mean

Answer 4

“controlling for”

“being held at their mean”

Question 5

why are categorical variables problematic to use in regression models? and what it the solution?

Answer 5

they have no important order, therefore dummy variables are created

Question 6

what is an underlying assumption when using dummy variables?

Answer 6

the relationship between other Xs and the dependent variable stay the same throughout - the slopes are parallel to one another

Question 7

dummy variables allow what to vary between groups?

Answer 7

the intercept