ABSTRACT
This chapter discusses the regression on dummy variables. The main purpose of including ‘dummy variables’ is that, they are tools that allow us to represent nominal-level independent variables in statistical techniques like regression analysis. Without the tool of dummy variables, the statistical methods would not be able to include nominal-level variables, which would be a severe limitation. This chapter illustrates how to employ categorical independent variables in the analysis and describes how to interpret the results of such analysis. In other words, a dummy variable is an artificial variable created to represent an attribute with two or more distinct categories or levels or classes or codes. Other names for dummy variables include Binary variables or Categorical variables or Qualitative variables or Dichotomous variables. The dummy variables can be used in regression analysis as easily as we use quantitative variables.
