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st: RE: Econometrics Theory Questions on Dummies and Correlation Analysis


From   "Nick Cox" <n.j.cox@durham.ac.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: Econometrics Theory Questions on Dummies and Correlation Analysis
Date   Mon, 18 Apr 2005 17:05:05 +0100

Please note various points about 
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As for your question, I don't think 
there is anything to prohibit you 
doing this. The results won't necessarily 
be very helpful or meaningful, except
in the extreme cases in which variables 
are identical, or nearly so, which will
produce correlations that are +1, or nearly 
so. 

Nick 
n.j.cox@durham.ac.uk 

Dr. Stephen Owusu-Ansah
 
> I have econometric/statistical theory questions about dummy
> variables and correlation analysis:
> 
> 1. Is there any theory that prohibit one from undertaking a
> correlation analysis (i.e., correlation matrix) with either
> with Pearson or Spearman rank correlation test on variables,
> which are all dummies?
> 
> 2. If there is no prohibition, theory wise, can the bivariate
> correlation coeficients for the dummy variables be interpreted
> in the same way as one would do with continuous variables?
> 
> Thanks for your usual cooperation.

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