Lesson 12: Binary Variables

March 8, 2016 at 2:45 pm  •  Posted in s16-busad360 by  •  2 Comments

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Wed, Mar 9


  • Multicollinearity
  • Interaction Variables
  • Exam 2
  • Reading assignments


  • Binary variables
    • also known as “Dummy” variables
    • also known as “Indicator” variables
    • value must be either “1” or “0”
  • Demonstration with Real Estate Sample data 


  • Use the textbook data (black_7e_excel_database) to experiment with Binary variables
    • Use the “Consumer Food” worksheet
    • Recode the “Region” and “Location” variables as Binary variables
    • Run regression with “Household Income”, “Non-Mortgage Debt” and the newly created Binary columns as independent (x) variables attempting to predict “Annual Food Spending” (y).
    • Eliminate insignificant variables from the model
    • Find the best combination of variables maximizing R-Squared and the F statistic simultaneously
    • Produce regression output for your final model

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