In general, to represent a categorical independent variable that has m possible categories, which of the following is the number of dummy variables that can be used in the regression model?
A) (m + 1) dummy variables.
B) m dummy variables.
C) (1 − m) dummy variables.
D) (m - 1) dummy variables.

Question

Quizplus · Accepted Answer

To avoid multicollinearity, we use (m - 1) dummy variables for a categorical variable with m categories, leaving one category as the reference group.

In General, to Represent a Categorical Independent Variable That Has