Does it make sense to do a pearson correlation matrix with several dummy /dichotomous variables?

Ronoowah Rishi Kapoor @Ronoowah-Rishi-Kapoor

04 January 2022 1 3K Report

HI. if I have 7 industry dummy variables and another dummy for listing status all being dichotomous in my model.

it results multicollineartiy issues when including all the dummies in the correlation matrix

Not really. If you want to calculate a difference use Sign-test or Wilcoxon matched pair signed-ranks test if the groups are related, if independent e.g. Mann-Whitney.

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