Categorical variable

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Updated: Aug 20, 2021

A variable whose values are alphanumerical codes for different categories of observations or for different qualitative outcomes, which nay or may not be ordered or ranked; for example, sex (male/female coded as M/F), preferred mode of transportation (cycle/bus/taxi coded as 1/2/3), opinions from a survey (say, strongly opposed’, ‘opposed’, ‘neutral’, ‘strongly support’ coded as 0/1/2/3/4. When used in a regression they are recoded as a binarv’ variable often referred to as a dummy variable), with value 1 for a particular observation if it belongs to a given category and 0 if it does not.

Reference: Oxford Press Dictonary of Economics, 5th edt.



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James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.