1
$\begingroup$

The degrees of freedom in a multiple regression equals N−k−1, where k is the number of variables. Does k include dummy variables?

For example, I have the model: Y=B1+B2D2+B3D3+B4D4+B5X1+B6X2+B7(D2D3)+B9(D2D4)+B9(D3D4)+B10(D2D3D4)+u (there are 2 X variables and 3 dummies)

N=14780 To get the Degrees of Freedom would i use 14780-2-1 or 14780-5-1 or something else entirely?

$\endgroup$
  • 2
    $\begingroup$ Yes, dummies count as variables. You lose one d.f. for each term. $\endgroup$ – Glen_b -Reinstate Monica Apr 11 '14 at 10:29
4
$\begingroup$

In a multiple regression, $df$ is $N-k-1$, where $N$ is the sample size and $k$ is the number of variables. Why $N-k-1$ and not just $N-k$, then?

The $df$ is a measure of the number of parameters to be estimated. In the simplest case - $Y \sim X$, we estimate a regression of the form $Y=\hat{\beta}_0+\hat{\beta_1}X$. This model has two parameters - $\hat{\beta_0},\hat{\beta_0}$ - but one variable, so $k=1$ and the $df = N-k-1=N-2$.

When dealing with a qualitative variable with $\nu$ levels, we do that by creating $\nu-1$ dummies and estimating a parameter for each of them. As such, a qualitative variable with $\nu$ levels reduce the $df$ by $\nu-1$ - for dichotomous dummies, this reduces to 1 for each dummy.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.