When Dealing with Categorical Variables in the Context of a Multivariate

question 3

Multiple Choice

When dealing with categorical variables in the context of a multivariate regression, we:

• A) Include the categorical variable directly into the model and interpret the results
• B) Change the categorical variable into a dummy variable (per category) and include all of the dummy variables in the regression.
• C) Change the categorical variable into a dummy variable (per category) and include all but one of the dummy variables in the regression.
• D) Interact the categorical variable with a continuous variable.

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Definitions:

Estimating Mean Value

The process of calculating the average value of a set of numbers or measurements.

Predicting Individual Value

The process of estimating the monetary or intrinsic value of a specific entity or individual based on relevant parameters.

Coefficient of Determination

is a statistical measure that explains the proportion of variance in the dependent variable predictable from the independent variable(s).

API Gravity Degrees

A measurement system used to determine the density of petroleum liquids compared to water.