Thanks, Martin.
I checked this and there is enough variation in the dropped variables.
Also, STATA removes them when I try to estimate a RE model (instead of a FE model).
Any other ideas on why they get dropped?
Thanks!
----- Ursprüngliche Mail ----
Von: Martin Weiss <[email protected]>
An: [email protected]
Gesendet: Mittwoch, den 17. Juni 2009, 17:49:30 Uhr
Betreff: st: AW: dropped interaction terms from FE model
<>
Just look at -xtsum- for your covariates after the estimation to see whether there is any within variation in the dropped variables. That would be the most likely culprit for an FE model. Note the covariate "black" in this example...
*************
// Setup
webuse nlswork, clear
gen age2 = age*age
gen ttl_exp2 = ttl_exp*ttl_exp
gen tenure2 = tenure*tenure
gen byte black = race==2
xtset idcode
xtreg ln_w grade age* ttl_exp* /*
*/ tenure* black not_smsa south, fe
capt ssc inst indeplist
qui indeplist, dropped
xtsum `r(X)' if e(sample)
*************
HTH
Martin
-----Ursprüngliche Nachricht-----
Von: [email protected] [mailto:[email protected]] Im Auftrag von P K
Gesendet: Mittwoch, 17. Juni 2009 23:44
An: [email protected]
Betreff: st: dropped interaction terms from FE model
Hi,
I am estimating the following FE panel model:
xtreg AverChangeROEadj2 strategy_01 duration_change_t1 ceo_change_t1 ceo_int_t1 tmt_turnover_t1 sizelnempl age prior_slack_avail2 ROEadj_1 external_change_dummy lgcount_strategy performance_crisis_ROEadj strategy_01_change_t1 strategy_ceoint ceoint_change change_ceoint_strategy, fe
However, the interaction between strategy_01 (a dummy variable) and change duration (continuous variable) gets dropped from the model (strategy_01_change_t1).
Also, the interaction between strategy_01 (a dummy variable), change duration (continuous variable) and ceo change (a dummy variable) gets dropped from the model. (change_ceoint_strategy)
Any hints why this could be the case and what to do about it (there is no multicollinearity or missing value problem)?
Thanks, Pat
Here's the STATA output:
Fixed-effects (within) regression Number of obs = 430
Group variable: number Number of groups = 60
R-sq: within = 0.0998 Obs per group: min = 1
between = 0.0009 avg = 7.2
overall = 0.0013 max = 9
F(14,356) = 2.82
corr(u_i, Xb) = -0.9883 Prob > F = 0.0005
AverCh~Eadj2 Coef. Std. Err. t P>t [95% Conf. Interval]
strategy_01 2.161211 2.012137 1.07 0.284 -1.795958 6.11838
duration_c~1 -.475537 .877321 -0.54 0.588 -2.20092 1.249846
ceo_cha~e_t1 .7214819 3.349671 0.22 0.830 -5.866149 7.309113
ceo_int_t1 -2.241493 4.682335 -0.48 0.632 -11.45001 6.967021
tmt_turno~t1 -2.060425 1.605712 -1.28 0.200 -5.218299 1.097448
sizelnempl -4.503579 1.727811 -2.61 0.010 -7.90158 -1.105579
age -.464394 .4892887 -0.95 0.343 -1.426654 .4978657
prior_slac~2 .5187986 .3436538 1.51 0.132 -.1570482 1.194645
ROEadj_1 -.0276773 .0467122 -0.59 0.554 -.1195439 .0641892
external_c~y 1.628413 1.329209 1.23 0.221 -.9856769 4.242503
lgcount_st~y 1.426753 2.201901 0.65 0.517 -2.903616 5.757123
perform~Eadj 5.296512 1.790716 2.96 0.003 1.7748 8.818223
strateg~e_t1 (dropped)
strategy_~nt 15.62659 5.616043 2.78 0.006 4.581794 26.67138
ceoint_cha~e -6.139526 1.89593 -3.24 0.001 -9.868157 -2.410895
c~int_stra~y (dropped)
_cons 69.46962 40.03339 1.74 0.084 -9.262056 148.2013
sigma_u 33.386383
sigma_e 12.392948
rho .87889857 (fraction of variance due to u_i)
F test that all u_i=0: F(59, 356) = 0.86 Prob > F = .7540
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