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st: Non-linear Simultaneous Equations


From   epowers@moore.sc.edu
To   statalist@hsphsun2.harvard.edu
Subject   st: Non-linear Simultaneous Equations
Date   Thu, 31 Oct 2002 11:41:11 -0500

Hi,  I am looking at bond tender offers, i.e. situations where a firm trys to buy back its bonds (publicly traded debt) from investors prior to the actual maturity date of the bonds.  I am interested in two things.  First, what determines the premium above current market price offered by the firm in the tender offer.  Second, what determines the percentage of bonds tendered by investors.  Obviously premium and percent tendered are endogenously determined.

Since percent tendered is constrained between 0 and 1, I don't want to use OLS for this particular equation.  Instead I want to estimate the following:

glm percent_tendered premium other_controls, family(binomial) link(logit) sca(x2)

(For and explanation of this regression methodology, see Papke and Woolridge, 1996, Econometric methods for fractional response variables with an application to 401 (K) plan participation rates, Journal of Applied Econometrics 11, 619- 632.)

Can I incorporate this non-linear regression into the reg3 command, or am I limited to manually doing 2-stage least squares?

Sincerely,



Eric A. Powers
Assistant Professor of Finance
The Moore School of Business
University of South Carolina
Columbia SC, 29208



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