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st: Probit estimated probabilities and Inverse Mills Ratio


From   "Subhankar Nayak" <nayak@bellsouth.net>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: Probit estimated probabilities and Inverse Mills Ratio
Date   Tue, 15 Jun 2004 12:26:54 -0400

I have the following setup:

I have an event C_EVENT that takes binary values (with 1 being event taking
place).
There are aset of variables caleed VARS that characterize this event.

I need two things:
1) for each event, I want the predicted probit event probability (EVENTPROB)
2) the inverse mills ratio, IMR, to carry out second pass linear
regressions.

My series of commands are:

probit C_EVENT VARS
predict EVENTPROB                                  /* gets the predicted
probabilities*/

predict PROBITXB, xb
gen PDFPROBIT = normd(PROBITXB)
gen CDFPROBIT = normprob(PROBITXB)
gen IMR = PDFPROBIT/CDFPROBIT      /* gets the inverse mills ratio*/

reg NEWVAR IMR REMAINVAR            /* second pass regression*/


Am I doing it correctly?

Or should I use:

heckman NEWVAR REMAINVAR, select (VARS) twostep
predict EVENTPROB

Feedback will be greatly appreciated.

Thanks,

Subhankar Nayak
Assistant Professor (Finance)
DuPree College of Management
Georgia Institute of Technology
Atlanta, GA 30332


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