Re: Dummy variables

On Sun, 28 Jan 2007 19:46:23 EST, joseph Frank
<josephFrank1969@xxxxxxxxxxx> wrote:

Hi,

I am running a regression using the following form

y=alpha+beta1(x1)+beta2(Dummy2)+beta3(Dummy3);

where x1 is the independent variable and Dummy2 and dummy 3 are dummy variables.
y is a return on bond, x is the return on the market, dummy2 = 1 if the bond is listed in the bond index on time t and zero otherwise, and dummy3=1 if another bond for the same company was listed in the index and zero otherwise(i used dummy 3 because i expect the listing of other bonds for the same company to affect the historical return of this bond). For certain bonds , 2 bonds are listed in the same time in the index. which means that dummy2 and dummy3 are equal to one at the same time. Is this correct? if bot how to avoid this problem?

Nothing wrong with this.
-*** Startz
.