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A dummy variable is a categorical variable that is used to represent subgroups within a dataset. Dummy variables are binary variables, taking on the values of 0 and 1, to represent the presence or absence of a particular characteristic.
Characteristics of dummy variables include:
- They are used to convert qualitative data into numerical form for analysis purposes.
- They can only take on the values of 0 or 1.
- They are used in regression analysis to account for categorical variables in a model.
- They are typically created by creating additional columns in a dataset, with each column representing a different category of the variable.