st: chow test multicollinearity

[fabio.zona@unibocconi.it]

Hi,

I run a chow test by running a single regression with dummy variables.
The F statistic is significant; however, the interacted terms are strongly multi-collinear.


What should I do in these case? 


a) is the chow test run through interacted terms (i.e. in one single regression) affected by the presence of multicollinearity among interacted terms?


b) I think that, given multicoolinearity, I cannot trust significance of interacted coefficiencts, and hence cannot say that the predictors are different in the two subgroups; correct?


c) is there a way to solve the multicollinearity? 


d) I know the command orthog to solve multicollinearity; however, can I apply this command after a predictor is squared? That is,
 ---- first calculate the standardized values of X 
 ---- then get the square of this standardized value
 ---- calculate the product of each of these two variables with a moderator Q
 ---- and THEN using "orthog"  on the values already standardized and interacted 
      (i.e., orthog  z_X   z_Xsquare   Q   z_X*Q   z_Xsquare*Q  )  
I fear this procedur might bias results. What do you think?



e) since my problem is with multicollinearity affecting interactions, could I get the chow test from moderated regressions, and attributing this chow test to coefficients gotten in separate regressions?



Thanks



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