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st: panel data: xtrege, re vs. xtreg, fe vs. regress...cluster


From   Michael Pfarrer <[email protected]>
To   [email protected]
Subject   st: panel data: xtrege, re vs. xtreg, fe vs. regress...cluster
Date   Sun, 11 Mar 2007 13:36:29 -0400

Hi Everyone,

I know this topic has been debated for years on the listserv with many helpful responses, but I thought I'd ask again to help me clarify things.

I have a dataset of 291 firms over 15 years (N=4365). What, in essence, is the "best" model to run for this analysis? I understand the difference between fe and re and the use of the Hausman test, which, for me, is n.s. But is there really an inherent difference between xtreg, re and regress, cluster(id)? The OLS regress, cluster(id) normally gives me "better" results, but I certainly want to understand if it is "correct". I also understand that xtreg, re can decompose into OLS. So, if you had these data across this panel with a continuous DV and continous and binary IVs, what would you run? The DV is the Cumulative Abnormal Return from a 3-day event window (-1, +1)and the IVs are firm financial characteristics--ROA, volume, reputation dummy, etc.

Many thanks,

Mike
Michael D. Pfarrer
Department of Management and Organization
Robert H. Smith School of Business
University of Maryland
College Park, MD 20742
Phone: 301.653.0458




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