Hi Mr. Baum,
Thanks very much for your wonderful example! I find I totally forget
the step "egen oneu=tag(company)". Thanks for pointing out this point.
Now, I understand why I got sd of u is not the same as sigma_u.
Do you mind helping me with a related question? In your example, I
tried to predict e(i,t):
.predict e, e
.sum e
The result is
Variable | Obs Mean Std. Dev. Min Max
-------------+--------------------------------------------------------
e | 200 -3.27e-08 51.28882 -184.0086 250.7097
while sigma_e = 52.767964
Could I think 51.28882 approximately equals 52.767964?
Thanks very much! I really parreaite it.
Man Jia
------------------------------------------------------------------------
--
Kit Baum wrote:
>< >
>Man Jia said
>Sorry to bother you with a very simple question. I just can't figure
>out why in my xtreg,fe output is value for sigma_u and the value for
>sd. of predicted u is not the same. I'm thinking I must have got lost
>with some simple thing. Could anyone give some hint? Thanks in advance!
>
>At the bottom of the result from --xtreg,fe stata reports sigma_u. I'm
>thinking it means the standard deviation of u(fixed effect). Please
>correct me if I'm wrong here. Then, I use --predict u,u to get variable
>u. But the standard deviation of u is not the same as sigma_u. I think
>either I misunderstand sigma_u's meaning or predicted u's meaning. Any
>comments is highly appreciated.
>
>
>webuse grunfeld
>xtreg invest mvalue kstock,fe
>predict u, u
>egen oneu = tag(company)
>su u if oneu
>
>There are only ten unique values of u_i. Their s.d. is indeed the same
>as that reported by sigma_u.
>
>Kit Baum, Boston College Economics and DIW Berlin
>http://ideas.repec.org/e/pba1.html
>An Introduction to Modern Econometrics Using Stata:
>http://www.stata-press.com/books/imeus.html
>
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