Classification

In general, there is no natural way to convert a qualitative response variable with more than two levels (high, medium, low) into a quantitative response that is ready for linear regression. It does not take into consideration the distance between high and medium and medium and low.

For a binary response with a 0/1 coding, regression by least squares is possible. However, some of our estimates might be outside the [0,1] interval, making them hard to interpret them as possibilities. The dummy variable approach cannot be easily extended to accommodate qualitative responses with more than two levels. For these reasons, it is preferable to use a classification method that is truly situated for qualitative response values, such as logistic regression.