Indicator Variables 1 Copyright © 2005 Brooks/Cole, a division of Thomson Learning, Inc. Chapter 7 Using Indicator and Interaction Variables Terry Dielman Applied Regression Analysis: A Second Course in Business and Economic Statistics, fourth edition

2 POP QUIZ #10 [2.5 points]

3 POP QUIZ #10 1. A good way to incorporate gender information into a regression model is to A.Add a variable X1, with X1=1 for males and X1=0 for females B.Add a variable X1, with X1=1 for females and X1=0 for males C.Either of (A) or (B); they are equivalent D.Split the data into two groups, one for males and one for females, and run two regression models

4 POP QUIZ #10 2.In the Treasury vs. Harris case, what was the effect of adding the MALES dummy variable on the fitted line? A.It moved the Salary vs. Education line up B.It moved the Salary vs. Education line down C.It rotated the Salary vs. Education line D.It left the Salary vs. Education line unchanged E.It split the Salary vs. Education line into two lines

5 POP QUIZ #10 3. In the Meddicorp example, how many dummy variables do we need to model 3 regions? A.2 dummy variables B.3 dummy variables C.4 dummy variables D.None of the above

6 POP QUIZ #10 4. In the Treasury vs. Harris case, what was the effect of adding the interaction term MSLOPE = EDUCAT*MALES on the fitted line? A.It had no effect on the Salary vs. Education line B.It moved the Salary vs. Education line up C.It split the Salary vs. Education line into two parallel lines D.It split the Salary vs. Education line into two lines, not necessarily parallel

7 POP QUIZ #10 5.Regression output of the Sales vs. Time data is shown above. Sales were recorded every quarter. What does it mean for the p-value of Q1 to be 0.254? A.SALES in quarter 1 are not related to TIME B.SALES in quarter 1 are not different from quarter 4 C.SALES in quarter 1 are not different from quarters 2 & 3 D.SALES in quarter 1 should be deleted from the data The regression equation is SALES = TIME Q Q Q3 Predictor Coef SE Coef T P Constant TIME Q Q Q

8 Answers! √

9 POP QUIZ #10 1. A good way to incorporate gender information into a regression model is to A.Add a variable X1, with X1=1 for males and X1=0 for females B.Add a variable X1, with X1=1 for females and X1=0 for males C.Either of (A) or (B); they are equivalent D.Split the data into two groups, one for males and one for females, and run two regression models √

10 POP QUIZ #10 2.In the Treasury vs. Harris case, what was the effect of adding the MALES dummy variable on the fitted line? A.It moved the Salary vs. Education line up B.It moved the Salary vs. Education line down C.It rotated the Salary vs. Education line D.It left the Salary vs. Education line unchanged E.It split the Salary vs. Education line into two lines √

11 POP QUIZ #10 3. In the Meddicorp example, how many dummy variables do we need to model 3 regions? A.2 dummy variables B.3 dummy variables C.4 dummy variables D.None of the above √

12 POP QUIZ #10 4. In the Treasury vs. Harris case, what was the effect of adding the interaction term MSLOPE = EDUCAT*MALES on the fitted line? A.It had no effect on the Salary vs. Education line B.It moved the Salary vs. Education line up C.It split the Salary vs. Education line into two parallel lines D.It split the Salary vs. Education line into two lines, not necessarily parallel √

13 POP QUIZ #10 5.Regression output of the Sales vs. Time data is shown above. Sales were recorded every quarter. What does it mean for the p-value of Q1 to be 0.254? A.SALES in quarter 1 are not related to TIME B.SALES in quarter 1 are not different from quarter 4 C.SALES in quarter 1 are not different from quarters 2 & 3 D.SALES in quarter 1 should be deleted from the data The regression equation is SALES = TIME Q Q Q3 Predictor Coef SE Coef T P Constant TIME Q Q Q √