Re: st: Nonlinear regression command

[Maarten Buis <maartenlbuis@gmail.com>]

This sounds to me like an interaction effect, so there is no need for
anything non-linear. There are however some main effects missing from
these interaction effects in your equations, so that looks like an
error. Other than that, take a look at -help fvvarlist- for a
convenient way of including interaction effects in your model.

Hope this helps,
Maarten

On Fri, Jul 12, 2013 at 2:11 PM, Rick Kamphuis
<r.kamphuis@tilburguniversity.edu> wrote:
> Dear Statalist,
>
> I have a formula, but I don't know how to replicate it in Stata, because of
> problems with the command.
>
> The formula I want to put in is from the Nguyen and faff 2010 paper: Are
> firms hedging or speculating? The relationship between financial
> derivatives and firm risk.
>
> The formula looks like this:
>
> Total Riskit = Dsi [a0 + a1 Extentit + a2 Levit +a3 Sizeit + a4 DYit + a5
> MTBVit + a6 Liqit + a7 CRit + a8 Exeshit + a9 Exeopit] + DLi [a10 + a11
> Extentit + a12 Levit +a13 Sizeit + a14 DYit + a15 MTBVit + a16 Liqit + a17
> CRit + a18 Exeshit + a19 Exeopit] +sigmait
>
> Where a is alpha and Ds and DL are dummies. Extent is the most important
> independent variable and all other variables are control variables. Behind
> every variable it is paste behind it because of the paneldata format.
>
> This formula is to test for a nonlinear relationship between total risk and
> the Extent (derivatives outstanding divided by size). The first dummy
> variable (Ds) is set equal to unity if the extent of derivative is 20% or
> less and zero otherwise. Similarly, DL is set equal to unity if the extent
> of derivative usage is 20% or more and zero otherwise. The threshold level
> of 20% is chosen as it represent the average extent of derivative usage
> demonstrated by firms in portfolio 6 (where maximum risk reduction is
> achieved).
>
> So the coefficients of primary interest in this equation are a1 and a11.
> Consistent with the results obtained from the section 'portfolio analysis'
> it is expected that moderate users (with an extent of derivative usage of
> less than 20%) will experience a reduction in risk and hence a negative
> sign is predicted for a1. For a11 it is the other way around.
> My question is: what is the command in stata to run this regression from
> above.
>
> I have thought about to cut the groups and do this regression two times
> with the moderate users and excessive users. However, I think this is not
> the meaning of this test.
>
> Hopefully someone can help me.
>
> Thanks,
>
> Rick Kamphuis
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-- 
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Maarten L. Buis
WZB
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Germany

http://www.maartenbuis.nl
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