Reference no: EM132845493

Let's return to an example with one dummy variable to make sure we understand how to interpret a dummy variable's coefficient in the context of a multiple regression model. Suppose you want to predict sneaker sales on the basis of advertising expenditures and sneaker color-red or blue. You create one dummy variable for the sneaker color (Red=1 for red sneakers and Red=0 for blue sneakers) and run the regression on data collected over ten years using the dummy variable and advertising expenditures as your independent variables. The equation you obtain is:

S?a?l?e?s=-631,085+533,024?(R?e?d)+50.5?(A?d?v?e?r?t?i?s?i?n?g)

How would you interpret the regression model? How would you interpret the coefficient for red sneakers?