Dear all,
Thank you for your suggestions. I tried based on your advise and find xtreg and xi: reg i. are the same, in terms of estimate and SE but may differ in R squred and others. Regarding the firm-year interaction dummy, I thought that over again, and I think indeed it is capturing a little different fixed effect, allowing each firm-year combination has an a different intercept and no relation between different intercepts. And also, if there is no variation within a firm-year combination, then the model cannot be estimated. I tried a2reg but it seems weird..Please correct me if I'm wrong.
Thanks!
Martin
======= 2008-06-25 05:02:52 Original Message��=======
>First, you probably should estimate with -xtreg- particularly if you
>are using robust or cluster to correct your standard errors. This is
>the designated fixed-effects procedure in Stata and it uses more
>appropriate cluster or robust corrections for the standard
>errors. Note that you will still need to include the time-specific
>dummies as -xtreg- has no option to supply them automatically.
>
>Second, if you believe that yearly (or any time based) shocks (such
>as say national shifts in in the business cycle) that affect all of
>the relationships are present, you should include time-specific dummy
>variables. But note that such models will be less efficient due to
>the increase in the number of parameters that must be estimated. The
>larger t-statistic you mention probably stems from greater
>multicollinearity in a two- rather than a one-way fixed-effects model.
>
>Dave Jacobs
>
>At 03:29 PM 6/24/2008, you wrote:
>>Dear Statalist,
>>
>>I have an old question, which command should I use for two-way fixed
>>effects? For example if I want to control both year and firm fixed
>>effects. I find two methods as follows:
>>1)
>>. egen dummy = group(firm year)
>>. xi: reg quantity price i.dummy
>>
>>and 2)
>>. xi: reg quantity price i.firm i.year
>>
>>I find the two methods gave the same estimation of coefficient, but
>>method 2) seems to yield a large t-stat. Could someone please advise
>>which one should I use?
>>
>>Many thanks!
>>
>>Martin
>>
>>
>>
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>
>
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