Using Categorical Variables in Discriminant Analysis

Abstract

Three methods of transforming unordered categorical response variables are described. One is a method using dummy variables. The second method, in which all categorical variables are analyzed simultaneously, is based on an eigenanalysis of frequency patterns scaled relative to within-groups variance, jointly developed by J. E. Overall and J. A. Woodward. With the third method, independently developed by R. A. Fisher and H. O. Lancaster, each categorical variable is analyzed separately with scale values generated so that the grouping variable and the categorical variable are maximally correlated. Results from analyzing two real data sets are used to illustrate the application of the three methods.