<p>&quot;Dummy variables&quot; are binary variables, i.e. indicator functions. The indicator function takes the value <span class="math-container">$1$</span> if the associated <em>event</em> happens:</p>
<p><span class="math-container">$$I\{A\}= \begin{cases} 1 &amp; A\; {\rm happens} \\ 0 &amp; {\rm otherwise} \end{cases}.$$</span></p>
<p>Event <span class="math-container">$A$</span> can be anything, like in your case <span class="math-container">$A=\{$</span>at least three criteria are met<span class="math-container">$\}$</span>.</p>
<p>In practice, you will most likely create intermediate <span class="math-container">$\{0,1\}$</span> dummy variables for each criterion, <span class="math-container">$I_1,...,I_4$</span>, then sum them per observation, <span class="math-container">$S = \sum I_i$</span>, and set <span class="math-container">$A=\{S\geq 3\}$</span> and your final dummy will be <span class="math-container">$I\{S\geq 3\}$</span>.</p>

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2024-01-22T23:34:04.157Z
2024-01-24T09:31:39.313Z
2024-01-24T09:31:39.313Z
Alecos Papadopoulos
<p>Let say I have criteria 1, 2, 3, and 4. I would like the Dummy variable to be 1 only if a certain minimum amount of criteria are met. For example, if 3 of the 4 are true, then Dummy =1. If 4 of the 4 are true, then Dummy = 1. But if only 1 or 2 are true Dummy = 0.</p>
<p>What would be the theory / practical / research to refer to that decide how much of this criteria is enough to meet for the dummy to be 1?
Possible readings that you have seen this applied in would also be welcome.</p>
<p>The dummy application is in a regression model.</p>

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2024-01-21T08:41:37.347Z
Hi! The [answer to your other question](https://economics.stackexchange.com/questions/57466/can-i-multiply-two-dummy-variables-together) seems to answer this in part, since there the effective condition for such a "complex" dummy is that dummy1 and dummy2 are both one. If these are dummies for the conditions 3 and 4 described in this question, then you have your multiple criteria that need to be met.
Giskard
CC BY-SA 4.0
2024-01-21T08:42:11.577Z
Also, there seems to be a disconnect between the body of your question and the tags: there is nothing about finance in your question.
Giskard
CC BY-SA 4.0
2024-01-22T05:16:59.517Z
I will elaborate. It is being applied in crisis situations (hence finance). Crisis are often not well defined in smaller G20 economies. In literature and practice, crisis cause volatility in exchange rates, market returns and so forth. Now if I set up 5 criteria, and want 4 out of the 5 criteria to be met for the Dummy to equal 1, what framework is applicable? 

The question you are referring to would require all conditions to be true. I am specifically asking about partial fulfillment being sufficient.
MLux
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2024-01-25T01:07:07.487Z
Does this answer your question? [Can I multiply two dummy variables together?](https://economics.stackexchange.com/questions/57466/can-i-multiply-two-dummy-variables-together)
csilvia
<mathematical-economics><regression><financial-economics><financial-markets>
Can a single dummy variable be made to meet multiple criteria?
MLux
# Can a single dummy variable be made to meet multiple criteria?

(Asked by: username_0 on 2024-01-21)

Let say I have criteria 1, 2, 3, and 4. I would like the Dummy variable to be 1 only if a certain minimum amount of criteria are met. For example, if 3 of the 4 are true, then Dummy =1. If 4 of the 4 are true, then Dummy = 1. But if only 1 or 2 are true Dummy = 0.

What would be the theory / practical / research to refer to that decide how much of this criteria is enough to meet for the dummy to be 1?
Possible readings that you have seen this applied in would also be welcome.

The dummy application is in a regression model.

**Tags:** mathematical-economics, regression, financial-economics, financial-markets
> **Comments:**
> **username_1**: Hi! The [answer to your other question](https://economics.stackexchange.com/questions/57466/can-i-multiply-two-dummy-variables-together) seems to answer this in part, since there the effective condition for such a "complex" dummy is that dummy1 and dummy2 are both one. If these are dummies for the conditions 3 and 4 described in this question, then you have your multiple criteria that need to be met.  
> **username_1**: Also, there seems to be a disconnect between the body of your question and the tags: there is nothing about finance in your question.  
> **username_0**: I will elaborate. It is being applied in crisis situations (hence finance). Crisis are often not well defined in smaller G20 economies. In literature and practice, crisis cause volatility in exchange rates, market returns and so forth. Now if I set up 5 criteria, and want 4 out of the 5 criteria to be met for the Dummy to equal 1, what framework is applicable?   The question you are referring to would require all conditions to be true. I am specifically asking about partial fulfillment being sufficient.  
> **username_2**: Does this answer your question? [Can I multiply two dummy variables together?](https://economics.stackexchange.com/questions/57466/can-i-multiply-two-dummy-variables-together)  

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## 1 answers

### Answer by username_3 on 2024-01-22. Score: 5 | Accepted answer

"Dummy variables" are binary variables, i.e. indicator functions. The indicator function takes the value $1$ if the associated *event* happens:

$$I\{A\}= \begin{cases} 1 & A\; {\rm happens} \\ 0 & {\rm otherwise} \end{cases}.$$

Event $A$ can be anything, like in your case $A=\{$at least three criteria are met$\}$.

In practice, you will most likely create intermediate $\{0,1\}$ dummy variables for each criterion, $I\_1,...,I\_4$, then sum them per observation, $S = \sum I\_i$, and set $A=\{S\geq 3\}$ and your final dummy will be $I\{S\geq 3\}$.


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