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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?
As stated above, the interpretation would require that you treat your nominal measures as if they are interval or ordinal.  You need to justify this treatment before interpretation, at least if you are picky picky picky.

- Paul Millar
Sociology
University of Calgary

----- Original Message -----
From: Nick Cox <n.j.cox@durham.ac.uk>
Date: Monday, April 18, 2005 10:05 am
Subject: st: RE: Econometrics Theory Questions on Dummies and Correlation Analysis

> Please note various points about 
> Statalist procedure: 
> 
> 1. This message is just a repeat of 
> one sent yesterday. 
> 
> 2. Please don't send email junk 
> like vcards with your postings. 
> 
> 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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