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Multiple regression analysis, categorial variables, continuous variable

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KKR
KKR 2012-1-12
Hi, I would like to run a multiple regression where my dependent variable is continuous. One of my independent variable is continuous, and the other independent variable is a category (small cap, midcap, largecap). I am not sure how to construct categorical independent variable. Do I have to use dummyvar function or can I just use 0 and 1 (1 for the category that applies to the observation).
Thank you in advance.

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bym
bym 2012-1-12
as long as you have one category variable, you can use just (0,1).
If , for example you had more than one category (small cap , mid cap, large cap); (public,private);(transportation,conglomerate,medical,etc) you would have to use dummyvar

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KKR
KKR 2012-1-12
Thank you for your quick response. So, I should just add three more columns (with zeros and ones) with first one(continuous variale) and run a normal regression. Correct?

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