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Re: st: fixed and random effect model


From   "Thomas Jacobs" <thomasjacobs@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: fixed and random effect model
Date   Mon, 22 Oct 2007 18:55:57 -0500

Dear Gary,

Is this a quarterly time period?  Have you experimented with robust or
cluster?  Given that firms typically have a pattern to dividend
changes, I would imagine you may have some independence issues within
the firm dimension (each firm over time).  I would suggest clustering
along the firm dimension with fixed effects given my understanding of
what you have relayed.  This is a great resource for such issues and
even includes some stata coding advice:

http://www.kellogg.northwestern.edu/faculty/petersen/htm/working.htm

see the first section.

Sincerely,

Tom

On 10/22/07, gtian@uow.edu.au <gtian@uow.edu.au> wrote:
> Dear Stata users,
>
>
>
> This question might have already been asked and answered here. I have a
> problem in choosing between pooled regression, fixed and random. The problem
> might be too simple to ask but your answer would be highly appreciated.
>
> I have unbalanced firm data: 50 firms, some firms have long data than
> others. I have run a simple Lintener model with change in dividend as
> function of earnings and dividend lag.
>
> (1) ASSUME THE x'S were independent of the omitted fixed effects; the
> Breusch-Pagan test (Greene pp. 298-299) would make sense. The result does
> not reject, so prefer pooled regression.
>
> (2) Then I also run Hausman test to see whether fixed effect model might be
> a right one:
>
> (2.1) compare fixed with random: indicating rejecting the consistent under
> null, so prefer the fixed.
>
> (2.2) also compare fixed with pooled regression: also reject the pooled
> regression.
>
> However, the fixed effect model itself has insignificant F test that all
> u_i=0, P-value is bigger than even 10%.
>
>
> Regards,
>
>
>
> Gary
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-- 
Thomas Jacobs
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