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From |
Chris Ruebeck <ruebeckc@lafayette.edu> |

To |
statalist@hsphsun2.harvard.edu |

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

Date |
Mon, 18 Apr 2005 22:43:25 -0400 |

To take Nick's example further, I think that Sam's point in a binary outcome was that finding a mean equal to one of the two outcomes would tell us the same thing as finding the variance equal to zero---and the mean, in this case, would actually tell us more than the variance did! On a more general basis, there is only one degree of freedom (once we fix the number of observations) in a binary outcome variable, so reporting both the mean and the variance is redundant. We choose the mean because it is easily interpreted (especially when the binary outcomes are 0 and 1) as the fraction of one outcome.

I recognize, though that this is a small eddy in the greater river of discussion to which Nick refers.

Chris

On Apr 18, 2005, at 5:39 PM, Nick Cox wrote:

I agree that means and variances of non-binary nominal codes don't usually make sense. The only exception I can think of is that zero variance has a clearcut interpretation, namely that all observations are in the same category. But you clearly don't need the variance to tell you that, and I don't think this is a point at issue in this thread.

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**References**:**RE: RE: st: RE: Econometrics Theory Questions on Dummies and Correlation Analysis***From:*"Nick Cox" <n.j.cox@durham.ac.uk>

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