Encoding categorical data: Is there yet anything 'hotter' than one-hot
  encoding?
Ekaterina Poslavskaya Alexey Korolev
Categorical features are present in about 40% of real world problems,
highlighting the crucial role of encoding as a preprocessing component. Some
recent studies have reported benefits of the various target-based encoders over
classical target-agnostic approaches. However, these claims are not supported
by any statistical analysis, and are based on a single dataset or a very small
and heterogeneous sample of datasets. The present study explores the encoding
effects in an exhaustive sample of classification problems from OpenML
repository. We fitted linear mixed-effects models to the experimental data,
treating task ID as a random effect, and the encoding scheme and the various
characteristics of categorical features as fixed effects. We found that in
multiclass tasks, one-hot encoding and Helmert contrast coding outperform
target-based encoders. In binary tasks, there were no significant differences
across the encoding schemes; however, one-hot encoding demonstrated a
marginally positive effect on the outcome. Importantly, we found no significant
interactions between the encoding schemes and the characteristics of
categorical features. This suggests that our findings are generalizable to a
wide variety of problems across domains.