EViews Training

Dummy Variables

Note: Data and workfiles for this tutorial are provided in:
Data: Data.xlsx
Results: Results.wf1
Practice Workfile: Data.wf1
Data and Workfile Documentation
Data.wf1 and Data.xlsx consist of two pages (tabs) with the following data:

Workfile Page: Dated (Data.xlsx tab Dated): daily, from Jan 1, 1950 August 2, 2012
Volume S&P 500 volume (source: St. Louis Federal Reserve Bank, FRED Database)
Volume1- percent change in S&P500 Volume
Return S&P 500 return (source: St. Louis Federal Reserve Bank, FRED Database)

Workfile Page: Cross_Section (Data.xlsx tab Cross_Section) data on 526 individuals

wage wage per hour (in dollars)
educ number of years of education
exper experience, number of years
female dummy variable, equal to 1 if female, 0 otherwise
married dummy variable, equal to 1 if married, 0 otherwise
* These data are from Wooldridge, Introductory Econometrics (4th Edition).

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Data Series Objects: Series and Groups
It is fairly easy to create dummy variables in EViews by using sample
commands or a number of EViews functions:
smpl
@recode
@date
@expand

This tutorial demonstrates how to create:

Dummy Variables using samples
Dummy Variables using the @recode function
Date Dummy Variables using the @date function
Categorical Dummy Variables using the @expand function

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Creating Dummy Variables
Using Samples
Creating Dummy Variables Using Samples:
Example 1
The easiest way to create dummy variables in EViews is by using samples
(smpl command).
Lets illustrate a few examples using the Dated page in Workfile Data.wf1.
Suppose you would like to create a dummy variable equal to 1, if return>0.2,
and 0 otherwise.
Dummies with samples: Example 1
1. Open Data.wf1 workfile. Click on the
Dated page.

2. Type in the command window:

smpl if return>0.2
series dummy1=1
smpl if return<=0.2
series dummy1=0

3. Press Enter after each command line

entry.

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Creating Dummy Variables Using Samples:
Example 1 (contd)
The original series (return) and the new dummy variable are both shown here.

Original series Dummy Variable

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Creating Dummy Variables Using Samples:
Example 2
Now suppose you would like to create a dummy variable equal to 1, if
return>0.3, or return<=-0.3, and 0 otherwise.
Dummies with samples: Example 2
Original Series Dummy Variable
1. Click on Dated workfile page. Type in the
command window:

smplifreturn>0.3orreturn<=0.3
seriesdummy2=1
smplifreturn>0.3andreturn<0.3
seriesdummy2=0

2. Press Enter after each command line.

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Creating Dummy Variables
Using @recode function
Creating Dummy Variables Using @recode
Another way to create dummy variables in EViews is by using @recode
function.

Function Description
@recode(s,x,y) Returns x if condition s is true; otherwise it returns y

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Creating Dummy Variables Using @recode:
Example 1
Suppose you want to create a dummy equal to 1 if return<=0.2, 0 otherwise.

Dummies with @recode: Example 1

1. Click on the Dated workfile page. Lets first set the
sample equal to the entire range by typing in the
command window smpl@all. Now, type in the
command window:
seriesdummy4=@recode(return<=0.2,1,0)

2. Press Enter.

Alternatively:
1. Click on the top menu bar of and select Quick
Generate Series.
2. The Generate Series by Equation dialog box
opens up. Specify here your dummy expression
(as shown here).
3. Click OK.

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Creating Dummy Variables Using @recode:
Example 1 (contd)
The original series (return) and the new dummy variable are both shown here.

Original series Dummy Variable

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Creating Dummy Variables Using @recode:
Example 2
Create a dummy variable equal to 1 if -0.2<return<1, 0 otherwise.

Dummies with @recode: Example 2

1. Click on Dated workfile page. Type in the command window:
seriesdummy5=@recode(return>0.2andreturn<1,1,0)

2. Press Enter.
Original Series Dummy Variable

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Creating Dummy Variables Using @recode:
Example 3
Create a dummy variable equal to 1 if return<=-1.2 or return>=1, 0 otherwise.

Dummies with @recode: Example 3

1. Click on Dated workfile page. Type in the command window:
seriesdummy6=@recode(return<=1.2orreturn>=1,1,0)

2. Press Enter.
Original Series Dummy Variable

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Creating Dummy Variables Using @recode:
Example 4
Suppose you would like to create two new series by separating an
existing series (return) as follows;
series1 collects values of return for which -0.3<return<0.3
series2 collects values of return for which return<=-0.3 or return>=0.3

Dummies with @recode: Example 4

1. Click on Dated workfile page. Type in the command window:
seriesseries1=@recode(return>0.3andreturn<0.3,return,0)
seriesseries2=@recode(return<=0.3orreturn>0.3,return,0)

2. Press Enter after each command line.

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Creating Dummy Variables Using @recode:
Example 4 (contd)
The original series (return) and the two new dummy variables are shown here.

Original series Series 1 Series 2

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Creating Dummy Variables Using @recode:
Example 5
Lets create a total return index from daily S&P500 returns.

Dummies with @recode: Example 5

1. Click on Dated workfile page. Type in the command window:
seriesindex=@recode(@trend=0,100,index(1)*(1+return/100))

2. Press Enter.
Original Series Index

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Creating Dummy Variables Using @recode:
Example 6
Lastly, suppose you want to create a series that excludes outliers from the
return series in the previous example.
Specifically, suppose that the new series excludes the highest and the lowest
2.5% values of returns.
Dummies with @recode: Example 6
1. Click on Dated workfile page. Type in the command window:
seriesno_outlier=@recode(return>@quantile(return,0.025)and
return<@quantile(return,0.975),return,na)

2. Press Enter.

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Creating Dummy Variables Using @recode:
Example 6 (contd)
The original series (return) and the new series are shown here.

Original series No Outlier

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A Few Notes on Simple Dummy Variables
For simple dummies, you dont need to use smpl or @recode.
You can create them simply by defining the logical expression directly in the
command window, as shown in the following examples.
However, you may have to use smpl or @recode for more complex cases.

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A few Notes on Simple Dummy Variables:
Example 1
Create a dummy equal to 1 if return<=0, and 0 otherwise.

Simple Dummies: Example 1

1. Click on Dated workfile page. Type in the Original Series Dummy Variable
command window:
seriesd1=return<=0

2. Press Enter.

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A few Notes on Simple Dummy Variables:
Example 2
Create a dummy equal to 1 if return<=-0.5 or return>=0.1, and 0 otherwise.
Simple Dummies: Example 2
1. Click on Dated workfile page. Type in the command
window:
seriesd2=return<=0.5orreturn>=0.1

2. Press Enter. Original Series Dummy Variable

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Date Dummy Variables
Creating Date Dummies
Dated dummies can be created by using @recode and @date or @dateval.
For more details on date functions, see tutorial on Date Functions.

Main Functions
Function Description
@date Returns the date associated with each observation

@dateval Returns the date associated with a text representation of a date

@year Returns the year in which each observation begins

@quarter Returns the quarter of the year in which each observation begins

@month Returns the month of the year in which each observation begins

@day Returns the day of the month in which each observations begins

@weekday Returns the day of the week

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Creating Date Dummies:
Example 1
Suppose you want to create a dummy variable equal to 1 for all dates after
1995/03/15 and 0 otherwise.
Date Dummies: Example 1
1. Click on the Dated workfile page. Now, type in the command window:
seriesdumdate1=@recode(@date>@dateval("1995/3/15"),1,0)

2. Press Enter. Dummy Variable

Alternatively, without @recode:

1. Type in the command window:
seriesdumdate1=@date>@dateval("1995/3/15")

2. Press Enter.

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Creating Date Dummies:
Example 2
Create a dummy variable equal to 1 for all dates before April 1979 and after
February 1994.
Date Dummies: Example 2
1. Click on the Dated workfile page. Type in the command window:
seriesdumdate2=@recode(@date<@dateval("1979m4")or
@date>@dateval("1994m2"),1,0)

2. Press Enter (please type the command in one line).

Alternatively, without @recode:

1. Type in the command window:
seriesdumdate2=@date<@dateval("1979m4")or
@date>@dateval("1994m2")

2. Press Enter (please type the command in one line).

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Creating Date Dummies:
Example 2 (contd)
A graph of the new dummy variable is shown here.
As you can see, it assumes a value of 1 prior to April 1979 and post
February 1994.
Dummy Variable

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Creating Date Dummies:
Example 4
Dated dummies can also be created using @year, @month, @day date functions.
Create a dummy equal to 1 if the month is January or the day of the week is Friday.
Date Dummies: Example 4
1. Click on the Dated workfile page. Now, type in the command window:
seriesdumdate4=@recode(@month=1or@weekday=5,1,0)

2. Press Enter. Dummy Variable

Alternatively, without @recode:

1. Type in the command window:
seriesdumdate4=@month=1or@weekday=5

2. Press Enter.

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Creating Date Dummies:
Example 5
Create a dummy equal to 1 for all years after 1994 if the month is January or the
day of the week is Friday.

Date Dummies: Example 5

1. Click on the Dated workfile page. Now, type in the command window:
seriesdumdate5=@recode(@year>1994and(@month=1or@weekday=5),1,0)

2. Press Enter.

Alternatively, without @recode:

1. Type in the command window:
seriesdumdate5=@year>1994and(@month=1or@weekday=5)

2. Press Enter.

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Creating Date Dummies:
Example 6
Create a dummy variable equal to 1 for all months when there is a presidential
election.
Date Dummies: Example 6
1. Click on the Dated workfile page. Now, type in the command window:
smpl@all Dummy Variable
seriesdumpres=0
smplif@mod(@year,4)=0and@month=11
seriesdumpres=1
smpl@all

2. Press Enter after each command line.

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Dummy Variables in Non-Dated
Workfiles
Dummies in Non-dated Workfiles
You can follow the methodology used in Dated Dummies to create dummies
in non-dated workfiles.
Simply use @obsnum (instead of @date) to create the dummy variables.

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Creating Dummies in Non-Dated Workfiles:
Example 1
In the Cross-Section page, create a dummy variable equal to 1 after the 5th
observation, and 0 otherwise.
Dummies in non-Dated Workfiles: Example 1
1. Click on the Cross-Section workfile page. Now, type in the command window:
seriesdum1=@recode(@obsnum>5,1,0) Dummy Variable
2. Press Enter.

Alternatively, without @recode:

1. Type in the command window:
seriesdum1=@obsnum>5

2. Press Enter.

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Creating Dummies in Non-Dated Workfiles:
Example 2
In the Cross-Section page, create a dummy variable equal to 1 for all the
observations between the 7th and 12th observation
Dummies in non-Dated Workfiles: Example 2
1. Click on the Cross-Section workfile page. Now, type in the command window:
seriesdum2=@recode((@obsnum>=7and@obsnum<=12),1,0)

2. Press Enter. Dummy Variable

Alternatively, without @recode:

1. Type in the command window:
seriesdum2=@obsnum>=7and@obsnum<=12

2. Press Enter.

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Creating Dummy Variables
Using @expand function
Creating Categorical Dummies
Categorical dummies can be easily created by using @expand function.

Function Description
@expand Allows you to create a group of dummy variables by expanding
out one or more series into individual categories

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Creating Dummy Variables using @expand:
Example 1: Categorical Dummies
Lets create a group of series as follows:
One series with 1 if female and 0 if male
One series with 1 if male and 0 if female

Dummies using @expand: Example 1

1. Click on the Cross-Section workfile page. Type in the command window:
groupg1@expand(female)

2. Press Enter.

The group is shown here with

the two series separating
males from females.

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Creating Dummy Variables using @expand:
Example 2: Categorical Dummies
Now lets create a new group of series as follows:
One series containing 1 if male and single.
One series containing 1 if male and married.
One series containing 1 if female and single.
One series containing 1 if female and married.

Dummies using @expand: Example 2

1. Click on the Cross-Section workfile page. Type in the command window:
groupg2@expand(female,married)

2. Press Enter.

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Creating Dummy Variables using @expand:
Example 3: Categorical Dummies
Now lets create a new group of series as follows:
One series equal to educ (years of education) if male (female=0).
One series equal to educ if female (female =1).

Dummies using @expand: Example 3

1. Click on the Cross-Section workfile page. Type in the command window:
groupg3educ*@expand(female)

2. Press Enter.

The group is shown here with the two

series showing the years of education
for males separately from years of
education for females.

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Creating Dummy Variables using @expand:
Example 4: Date Dummies
Dummies can also be created by using @expand in conjunction with other
date functions (@year, @month, @day, etc.).
For example, suppose you would like to create a dummy variable for each
day of the week.
Dummies using @expand: Example 4
1. Click on the Dated workfile page. Type in the command window:
groupg1@expand(@weekday)

2. Press Enter.

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Creating Dummy Variables using @expand:
Example 5: Date Dummies
Suppose that now you would like to create a dummy variable for each year.
Dummies using @expand: Example 5
1. Click on the Dated workfile page. Type in the command window:
groupg2@expand(@year)

2. Press Enter.

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Dummy Variables in Regressions
Dummies in Regressions:
Example 1
In EViews you can use dummy variable expressions in regressions without
having to first create and save the dummies.
Suppose you would like to estimate a regression of return on volume1 and a
dummy variable equal to 1 for all dates after 1994/12/2.
Dummies in Regressions: Example 1
1. Click on the Dated workfile page. Type in the
command window:
equationeq1.lsreturncvolume1
@date>@dateval("1994/12/2")

2. Press Enter (type the command in one line).

Alternatively:
1. Select Quick Estimate Equation from
the top menu bar.
2. The Equation Estimation box opens up.
Specify here your equation (as shown in
the figure)
3. Click OK.

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Dummies in Regressions:
Example 1 (contd)
The estimation output is shown here.
As you can see EViews estimates the coefficient of the dummy variable
directly without us having to create and save the date dummy first.

*Note: see tutorial on Basic Estimation for details

on regression analysis in EViews.
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Dummies in Regressions:
Example 2
Now suppose you would like to estimate a regression of return on volume1 and
a dummy variable equal to 1 for all Januaries since 1994/12/2.
Dummies in Regressions: Example 2
1. Click on the Dated workfile page. Type in the command window:
equationeq2.lsreturncvolume1(@date>@dateval("1994/12/2")and@month=1)

2. Press Enter.

Note that there are no spaces in

the logical expression:
@month=1 is correct
@month = 1 is not correct

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Dummies in Regressions:
Example 3
Now lets carry out a regression in the Cross_Section workfile page.
Suppose we want to regress wage on exper, educ and four dummy variables
created by @expand(female,married).
Dummies in Regressions: Example 3
1. Click on the Cross_Section workfile page.
Type in the command window:
equationeq1.lswageexpereduc

@expand(female,married)

2. Press Enter (type command in one line).

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Dummies in Regressions:
Example 3 (contd)
In the previous example, notice that the constant was not included.
If you include a constant, then EViews will be unable to estimate the
regression and return an error message because of perfect collinearity (the
dummy variable trap).
Dummies in Regressions: Example 3
1. Type in the command window:
equationeq1.lswagecexpereduc

@expand(female,married)

2. Press Enter (type command in one line).

You will receive an error message

(shown here).
In order to estimate the regression with
a constant, you should exclude one of
the dummies.

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Dummies in Regressions:
Example 3 (contd)
Lets exclude one of the dummies. You can use either one of the following
commands:
@dropfirst (drops the first dummy).
@droplast (drops the last dummy).

Dummies in Regressions: Example 3

1. Type in the command window:
equationeq2.lswagecexpereduc

@expand(female,married,@dropfirst)

2. Press Enter (type command in one line).

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