Question

Understand these concepts and terms:

7. Dummy variable

9. D-W Statistic

I need help understanding these terms. What exactly they are, when they might be used, etc...

Answer 1

Dummy variable-------------------------A dummy variable is a numerical variable used in regression analysis to represent subgroups of the sample in your study. In research design, a dummy variable is often used to distinguish different treatment groups. A dummy variable is a numeric variable that represents categorical data, such as gender, race, political affiliation, etc. a dummy variable is one that takes the value 0 or 1 to indicate the absence or presence of some categorical effect that may be expected to shift the outcome. Dummy variables are used as devices to sort data into mutually exclusive categories. For example, in econometric time series analysis, dummy variables may be used to indicate the occurrence of wars or major strikes. A dummy variable can thus be thought of as a truth value represented as a numerical value 0 or 1.

9. D-W Statistic-----------The Durbin Watson (DW) statistic is a test for autocorrelation in the residuals from a statistical regression analysis. The Durbin-Watson statistic will always have a value between 0 and 4. A value of 2.0 means that there is no autocorrelation detected in the sample. Values from 0 to less than 2 indicate positive autocorrelation and values from from 2 to 4 indicate negative autocorrelation. the Durbin–Watson statistic is a test statistic used to detect the presence of autocorrelation at lag 1 in the residuals from a regression analysis. It is named after James Durbin and Geoffrey Watson.