Asked by Shannon Michaud on May 09, 2024
Verified
The NYSE works 5-day work per week.If we want to measure the impact of the day of the week on NYSE performance we would need:
A) 7 indicator variables
B) 6 indicator variables
C) 5 indicator variables
D) 4 indicator variables
Indicator Variables
Variables used in statistical models that take a value of 1 to indicate the presence of a particular condition or characteristic and 0 to indicate the absence.
NYSE Performance
An overview or analysis of how stocks listed on the New York Stock Exchange are trading, indicating overall market conditions.
- Recognize the specific applications of time series analysis in various contexts, such as stock market performance.
Verified Answer
RR
Rahul RadheshMay 11, 2024
Final Answer :
D
Explanation :
To measure the impact of the day of the week on NYSE performance, we would need one fewer indicator variable than the number of categories (days in this case) to avoid the dummy variable trap. Since there are 5 workdays, we need 4 indicator variables.
Learning Objectives
- Recognize the specific applications of time series analysis in various contexts, such as stock market performance.
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