Hello.
I would like to run panel regression using firm level annual data such that
y=a0+a1x1+a2x2+...
The problem here is that I have no data for x1(firm level),thus I instead,
tried to regress x1 on related variables using "industry level" data and use
the fitted values to generate x1.
More specifically,
1st step: run X1=b0+b1*Z1+b2*Z2+... and find out fitted values of all b's (X1
and all Z's are industry level data, but not annually )
2nd step: using fitted value b's and firm level data,
find out x1 such that x1=b0hat + b1hat*z1+b2hat*z2
(all z's are firm level annual data, )
3rd step: run first regression.
It look like generating proxy var. for x1.
I would like to know if anything wrong this approach under the case that there
exist no data or if there are better suggestions.
WT
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