If a Categorical Variable Has K Levels, the Number of Dummy

question 65

Multiple Choice

If a categorical variable has k levels, the number of dummy variables required is​

• A) ​k - 1.
• B) ​k.
• C) ​k + 1.
• D) ​2k.

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Definitions:

Dividend Yield

The ratio of a company's annual dividends per share to its current share price, indicating how much an investor gets back relative to the share price.

Working Capital Accruals

The portion of earnings not realized in cash, representing changes in working capital that affect a company's cash flow.

Turnover

The ratio of the trading activity of a portfolio to the assets of the portfolio.

Liquidity Betas

A measure of how sensitive an asset's price is to changes in market liquidity, often used in financial modeling to assess the impact of liquidity risk.