Thanks for your replies, I have 5 minutes to reply to some of your comments because my
wife and friends are waiting for me to get home so we can go to New Orleans.
1. I agree with Joe that the term "dummy" in dummy coding is a rather dumb term to use
for indicator variables. The terms is widely used in political science, sociology, and
business/econometrics (e.g., see Mendenhall and McClave's A second course in business
statistics: regression analysis). I'll start using the term indicator coding if that's
okay.
2. Okay, I'll check out some interactions (probably two way based on substantive
concerns). We will have about 15 predictor variables; hence, I don't think we will
include all possible interaction terms! BTW, the reason I used the term prediction
rather than explanation is because my objective was primarily predictive (we are
trying to predict prices of corporate training events)...this use is consistent with
Pedhazur's use of the term prediction in his book on multiple regression. The title of
his book is Multiple regression in the behavioral sciences: explanation and prediction.
3. In effects coding as I was using the term, consistent with Pedhazur, one group
always gets -1 (like the group always getting 0 in dummy/indicator coding).
4. I will post an example where dummy/indicator and effects coding provide different
results when I get back from my trip. Pedhazur specifically recommends not using dummy
coding for this reason in the 2nd and 3rd editions of his text on multiple regression.
I'll supply page numbers later..
Thanks again for your thoughts.
Burke
