Variables, Levels of Measurement and Dummy Variables

A. Variable - a characteristic that changes or varies over time and/or for different individuals or objects under
consideration
Types of Variables:
1. Qualitative (categorical) Variables - measure a quality or characteristic on each experimental unit; produce
data that can be categorized according to similarities or differences (i.e., categorical data)
Example:
gender - male/female (binary variable)
major - math/engineering/business/education/biology/chemistry, etc.
religion
color of a car
rating - excellent/good/fair/poor
2. Quantitative (numerical) Variables - measure a numerical quantity or amount on each experimental unit
A. Discrete Variable - can assume only a finite or countable number of distinct possible values
Example: class size - # of students; number of tickets sold; number of errors in a quiz
B. Continuous Variable - can take any value in either a finite or infinite range
- sometimes the measuring device limits the possible values that a continuous variable can take (e.g., if the
weighing machine only gives weights to the nearest gram), but we generally treat the resulting variable as
continuous rather than discrete as this is its underlying characteristic
Example: interest rate in %; weight in kg.; volume in liters; time to complete an exam
B. Scales (or Levels) of Measurement
Measurement is the assignment of numbers to characteristics of objects, persons, states, or events, according to
rules. The term number in the preceding statement does not always necessarily mean numbers that can be added,
subtracted, divided, or multiplied. Instead, it means that numbers are used as symbols to represent certain
characteristics of the object. The nature of the meaning of the numbers -- symbols -- depends on the nature of the
characteristics they are to represent and how they are to represent them.
The type of information that one obtains depends on the level of measurement of each variable. As we move from
nominal, ordinal, interval to ratio scales, the kinds of arithmetic operations for which the numbers can be used are
increased.
1. The Nominal or Categorical Scale
A nominal variable is one whose values are categories (e.g., eye color, texture, gender, employee number,
religion). A nominal scale is a figurative labeling scheme in which the numbers serve only as labels or tags for
identifying and classifying objects. This scale is also known as a classificatory scale.
A binary variable is a nominal variable having just two possible categories (e.g., presence or absence of pain).
A mean or a median cannot be calculated for nominal data. A mode, frequency counts, and percentages of
items falling within each category can be determined.
Examples:

SSS/GSIS numbers
student numbers
employee numbers
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gender:
1-male, 2-female
religion:
1-Catholic, 2-Protestant, 3-INK, 4-Muslim, 5-Others
preferred burger: 1-Jollibee, 2-McDonald's, 3-Brother's, 4-Burger King
2. The Ordinal or Ranking Scale
An ordinal variable has categories that are ordered in some way (e.g., pain level = no pain, mild pain, moderate
pain, severe pain). An ordinal scale is a ranking scale in which numbers are assigned to objects to indicate the
relative extent to which the objects possess some characteristic. It allows you to determine whether an object
has more or less, but not how much more or less, of a characteristic than some other object. Typical relations
among classes are: higher, better, more preferred, more difficult, more disturbed, more mature, etc.
The statistic most appropriate for describing the central tendency of scores in an ordinal scale is the median,
since, relative to the distribution of scores, the median is not affected by changes of any scores which are above
or below it as long as the number of scores above and below remains the same. With ordinal scaling,
hypotheses can be tested by using that large group of nonparametric statistical tests which are sometimes called
ranking statistics or order statistics.
Examples:

socioeconomic status:
A, B, C, D, E, F
course grade:
4.0, 3.5, 3.0, 2.5, 2.0, 1.5, 1.0, 0.0
Likert scale:
1-Strongly Agree, 2-Agree, 3-Neutral, 4-Disagree, 5-Strongly Disagree
preference data

3. The Interval Scale

In an interval scale, numerically equal distances s on the scale represent equal values in the characteristic
being measured. It contains all the information of an ordinal scale, but it also allows you to compare the
differences between objects. The difference between any two adjacent scale values is identical to the difference
between any other two adjacent values of an interval scale. There is a constant or equal interval between scale
values.
However, the location of the zero point is not fixed. Both the zero point and the unit of measurement are
arbitrary. In an interval scale, the zero point is arbitrary (artificial) and the ratio between scale points does not
make interpretable sense.
Virtually the entire range of statistical analyses can be applied to interval scales. These include such descriptive
measures as the mean, median, mode, range, and standard deviation. Bivariate correlation analyses, t-tests,
analysis of variance tests, and most multivariate techniques applied for purposes of drawing inferences can be
used on intervally-scaled data.
Some researchers try to achieve an interval scale by employing an ordinal scale with several scale points.
Examples:

temperature on the Celcius or Farenheit scales

index numbers
attitude measures

4. The Ratio Scale

A Ratio scale possesses all the properties of the nominal, ordinal, and interval scales and, in addition, an
absolute (true) zero point. In this case, the number 0 has an absolute empirical meaning -- none of the property
being measured exists. Thus, it is meaningful to compute ratios of scale values.
Any parametric statistical test is usable when ratio measurement has been achieved and the additional
assumptions concerning the distribution are met. Moreover, there are some statistics which apply only to data
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which lie in a ratio scale. Because of the strong assumptions which underlie the scale, most of these are
parametric tests.
The interval and ratio scales are the truly quantitative scales of measurements. All descriptive and inferential
techniques are applicable to ratio-scaled data. However, this produces only a minimal gain in analytic technique
beyond those available for interval data.
It is also possible to construct ratio-level scales to measure opinions, attitudes, and preferences.
Examples:

mass/weight in ounces, pounds, or kilograms

height/length in meters, inches, or feet
temperature on the Kelvin scale
sales, costs, units produced, number of customers

C. Dummy Variables
Variable respecification involves the transformation of data to create new variables or modify existing variables to
create variables that are more consistent with the objectives of the study. An important respecification procedure
involves the use of dummy or indicator variables for respecifying categorical variables. They are variables that may
take on only two values: 0 or 1. Dummy variables are special types of binary, dichotomous, instrumental, and
qualitative (categorical) variables.
As a general rule, to respecify a categorical variable with K categories, K1 dummy variables are needed. The reason
for having K1, rather than K, dummy variables is that only K1 categories are independent. Given the sample data,
information about the Kth category can be derived from information about the other K1 categories.
Examples:
1.

Gender (K = 2)
Category
1 Male
2 Female

2.

Dummy Variable Code

X1
1
0

Skin Tone (K = 3)
Dummy Variable Code
X1
X2
1 Light
1
0
2 Fair
0
1
3 Dark
0
0
Note that X1 = 1 for Light and 0 for all others. Similarly, X2 = 1 for Fair and 0 for all others.
The choice of the category Dark as the baseline/reference category (X1 = 0 and X2 = 0) is arbitrary.
Category

3.

Taste (K = 4)
Dummy Variable Code
X1
X2
X3
1 Bitter
1
0
0
2 Sour
0
1
0
3 Sweet
0
0
1
4 Salty
0
0
0
Note that X1 = 1 for Bitter and 0 for all others; X2 = 1 for Sour and 0 for all others; and X3 = 1 for Sweet and 0
for all others.
Category

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