Linear Regression for Business Statistics

Incorporating ‘Categorical Variables’ in a regression model.

...the Dummy Variable regression technique
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.
...the Dummy Variable regression technique

A parcel delivery service operates in two different regions, region “A”

and region “B”. Delivery trucks leave the central warehouse and travel
to region A and deliver parcels in that region. Similarly delivery trucks
also leave the central warehouse and travel to region B and deliver
parcels in that region.
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.
...the Dummy Variable regression technique
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.
...the Dummy Variable regression technique

A
B
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.
...the Dummy Variable regression technique

A
One ‘dummy variable’ needed
B
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.
...the Dummy Variable regression technique

A
One ‘dummy variable’ needed (REGA)
B
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.
...the Dummy Variable regression technique

A
One ‘dummy variable’ needed (REGA)
B
A B
1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.
...the Dummy Variable regression technique

A
One ‘dummy variable’ needed (REGA)
B
A B
1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.
...the Dummy Variable regression technique

A
One ‘dummy variable’ needed (REGA)
B
A B
1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.
...the Dummy Variable regression technique

A
One ‘dummy variable’ needed (REGA)
B
A B
1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.
...the Dummy Variable regression technique

A
One ‘dummy variable’ needed (REGA)
B
A B
1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Example (deliveries2.xlsx)
The parcel delivery service obtains some additional data, this time for a
third region it delivers to, region C. So now, the data consists of
deliveries across three regions, region A, region B and region C.
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Example (deliveries2.xlsx)
The parcel delivery service obtains some additional data, this time for a
third region it delivers to, region C. So now, the data consists of
deliveries across three regions, region A, region B and region C.
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Example (deliveries2.xlsx)
The parcel delivery service obtains some additional data, this time for a
third region it delivers to, region C. So now, the data consists of
deliveries across three regions, region A, region B and region C.
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Example (deliveries2.xlsx)
The parcel delivery service obtains some additional data, this time for a
third region it delivers to, region C. So now, the data consists of
deliveries across three regions, region A, region B and region C.
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B
C
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed
C
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed
C
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables
Reference Category
A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0

Difference in overall delivery time it takes to make deliveries to Region A

as compared to Region C, all other variables kept at the same level.
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0

Difference in overall delivery time it takes to make deliveries to Region A

as compared to Region C, all other variables kept at the same level.
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0

Difference in overall delivery time it takes to make deliveries to Region A

as compared to Region C, all other variables kept at the same level.
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0

Is the difference in the fixed time to make deliveries across the two regions.
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0

p-value > 

Is the difference in the fixed time to make deliveries across the two regions.
Linear Regression for Business Statistics
Incorporating ‘Categorical Variables’ in a regression model.

Y variable X variables

A
B Two ‘dummy variables’ needed A B C
C 1 0 0
0 1 0

Difference in overall delivery time it takes to make deliveries to Region B

as compared to Region C, all other variables kept at the same level.