unable to understand the interpretation of the parameter estimation, please help.
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When all other dummy variables are 0, you are on Friday, so intercept refers to the average returns on Friday.
If there are 5 Dummy, we should only take 4 to avoid fitting a model with perfectly correlated variables – this is a Dummy variable trap.
In this example, 4 dummy variables have their betas while the last i.e. Friday is being sent to the intercept to avoid a perfect correlation or the problem of multicollinearity.
Interpretation for Intercept = Expected average returns on Friday
Interpretation of b1D1 = Expected average returns on Monday over and above the average returns on Friday.
Hope this gives you more insights into the interpretation.
yes thank you