In preparing categorical variables for analysis, it is usually best to

a. convert the categories to numeric representations.
b. convert the categories to binary, dummy variables.
c. combine as many categories as possible.
d. let them remain categorical.


b
RATIONALE: Typically, it is best to encode categorical variables with 0-1 dummy variables. Using 0-1 dummy variables to encode categorical variables with many different categories results in a large number of variables. In some cases, the number of categories may be reduced by combining categories.

Business

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