Interpreting dummy variables and the dummy-variable trap
You have a categorical regressor, sector, with four levels (Tech, Energy, Financials, Healthcare), and you encode it with dummy variables in a regression with an intercept.
How do you interpret each dummy's coefficient, and why can you not include a dummy for every level alongside the intercept?
Show a hint
If you add up all four "one per level" dummies, what do you get for every single row?
Your answer
This one is open-ended. Work it through, then check your reasoning against the full solution.