st: Creating categories of Continuous Variable

[Satyen Dubey <vikramfinavker@gmail.com>]

Dear All,

I am examining the effect of "Y" variable on certain firm financial risk
variables. I am using OLS model to do this. My model looks like following. 

Firm Risk Variable  = b+ "Y" + other variables

"Y" is a continuous variable and if theory holds should reduce firm risk.

Now i suspect that the effect of "Y" may not be the same for different
levels of "Y" e.g. for low values of "Y" the effect could be negative and
for high values (very extensive use) the effect could be positive.

To do this analyse I have created 5 dummy variables.
1) "Y"  <= 20% use then 1 otherwise 0
2) 20% < "Y" <= 40% then 1 else 0
3) 40% < "Y" <= 60% then 1 else 0
4) 60% < "Y" <= 80% then 1 else 0
5) "Y"  > 80% use then 1 otherwise 0

After  examine the following model.

Firm Risk Variable  = b+ "Y" *(1)+ "Y" *(2)+ "Y" *(3)+ "Y" *(4)+ "Y" *(5) +
other variables

My Questions is:

Is this correct way to do this?

Is there any other way i can examine this?

Thanks in advance.




-----
Thanks & Regards,

Satyen Dubey
--
View this message in context: http://statalist.1588530.n2.nabble.com/Creating-categories-of-Continuous-Variable-tp7580491.html
Sent from the Statalist mailing list archive at Nabble.com.
*
*   For searches and help try:
*   http://www.stata.com/help.cgi?search
*   http://www.stata.com/support/faqs/resources/statalist-faq/
*   http://www.ats.ucla.edu/stat/stata/