Dummy Variables and Analysis of Covariance
So far we have mostly seen quantitative variables in regression models, but many variables of interest are qualitative (sex, status, etc). To add such information to a model, we can set up a indicator/dummy variable. For example, we could set up a variable Xi1 representing sex as 0 for male and 1 for female for the ith individual.
Models with Interaction
If we have a first-order regression model with an interaction we can represent it with an interaction term:
We can illustrate interaction as follows:
