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From |
"Rafael Bradley" <r.bradley@quanticle.com> |

To |
<statalist@hsphsun2.harvard.edu> |

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

Date |
Mon, 18 Apr 2005 11:37:44 -0700 |

With respect to application of the Pearson correlation ceofficient to dichotomous variates: Theoretically, the issue lies not with the mechanics of calculation per se, but rather inferences you desire to draw from the coefficient itself once calculated. The standard inferential statistics (i.e., tests of significance of the coefficient, conf. intervals around the coef.) associated with the Pearson coefficient assume normality in their derivations. This is obviously a strong assumption with dummy variables. In practice, I find the Pearson coefficient tends towards either 0 or 1 when applied to dummies. Best Regards, Rafael -----Original Message----- From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Dr. Stephen Owusu-Ansah Sent: Monday, April 18, 2005 8:20 AM To: statalist@hsphsun2.harvard.edu Subject: st: Econometrics Theory Questions on Dummies and Correlation Analysis Hi: 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. Regards, Stephen * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**References**:**st: Econometrics Theory Questions on Dummies and Correlation Analysis***From:*"Dr. Stephen Owusu-Ansah" <sowusuansah@rgv.rr.com>

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