dummy variables problem

awex

New Member
#1
hello,
at first.. sorry about my bad english..

ok, for my thesis i have to run a regression. this regression uses two dummyvariables. so far so good.
the background is, that i want to explain an expected value for a assetreturn (R) with an indexreturn (IR).

I have a Dummyvariable D1 which takes on vlaue 1 when R is positive and zero otherwise, and D2 which takes on the value 1 only when R is negativ. b1(D1)*D1 and b2(D2)*D2 are both intercept terms.

R= b1(D1)*D1+b2(D2)*D2+b1(D1IR)*D1*IR+b2(D1IR)*D2*IR
the thing is, i need two intercept terms...
i think, i could run two regressions: one if R is positiv and one if R is negative?

It would be sooo nice if i could get an answer.!!!
Marius