Question

A variable that takes on the values of 0 or 1 and is used to incorporate the effect of categorical variables in a regression model is called?

Answer 1

A variable that takes on the values of 0 or 1 and is used to incorporate the effect of categorical variables in a regression model is called the dummy variable.

We know that,

A dummy variable is a binary variable that takes a value of 0 or 1.

In regression analysis, a dummy variable is one that takes only the value 0 or 1 to indicate the absence or presence of some categorical effect that may be expected to shift the outcome.

The number of dummy variables we must create is equal to k - 1, where k is the number of different values that the categorical variable can take on.

It is an artificial variable created to represent an attribute with two or more distinct categories/levels.

These are being used in order to sort out data into mutually exclusive groups.

It is used typically in time series analysis, response modelling, bio-medical studies, economic forecasting and credit scoring.

Therefore, a variable that takes on the values of 0 or 1 and is used to incorporate the effect of categorical variables in a regression model is called the dummy variable.

Learn more about the dummy variable here:

brainly.com/question/4528945

#SPJ4