Dear Statalist,
among all independent variables in a regression analysis there are two
highly correlated ones (logmarketcap (firm size) and logstockmarket
(size of a stock market of the country a firm is located in). Both
variables correlate by 0.5. My hypothesis is that both variables have
a negative effect on the dependent variable. To cope with the high
correlation I created a interaction effect of the two variables and
included the interaction effect in the regression.
All three variables (logmarketcap, logstockmarket, and interaction
effect) are significant in the regression output, however with varying
signs of the coefficients (positive for logstockmarket and
logmarketsize, negative for the interaction effect). However, I am now
wondering what's the total effect? is it negative, or positive? How
can I evaluate this question for both variables logstockmarket and
logmarketcap?
Best regards
Christian
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