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st: Estimating fixed effects - why is a firm dropped?
I'm back with another panel data question. I am estimating the following
btmit = a + ai + at + r0retit + r1retit + r2retit + r3retit + r4retit +
r5retit + r6retit + eit
. tsset permno yeara
panel variable: permno, 10051 to 92655
time variable: yeara, 1993 to 1998
. xi: reg btm i.permno r0ret r1ret r2ret r3ret r4ret r5ret r6ret
i.permno _Ipermno_10051-92655(naturally coded; _Ipermno_10051
i.yeara _Iyeara_1993-1998 (naturally coded; _Iyeara_1993
Another paper also uses this model. The author states, "[The firm fixed
effect] is -ai in [the above equation], and represents an intercept
shift for each firm, incremental to the overall cross-sectional
intercept. Thus, it is mean zero by construction."
My firm fixed effects do not sum to zero. Can someone help me see what I
am doing wrong? Thank you for your help.
University of Connecticut
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