Optimal dichotomization of bimodal Gaussian mixtures

Despite criticism for loss of information and power, dichotomization of variables is still frequently used in social, behavioral, and medical sciences, mainly because it yields more interpretable conclusions for research outcomes and is useful for decision making. However, the artificial choice of cut-points can be controversial and needs proper justification. In this work, we investigate the properties of point-biserial correlation after dichotomization with underlying bimodal Gaussian mixture distributions. We propose a dichotomous grouping procedure that considers the largest standardized difference in group mean while minimizing information loss.