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From |
Kit Baum <kitbaum@mac.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
st: (fixed effect) sigma_u & s.d. of u |

Date |
Fri, 05 Sep 2008 20:54:36 -0400 |

< >

Man Jia said

Sorry to bother you with a very simple question. I just can't figure

out why in my xtreg,fe output is value for sigma_u and the value for

sd. of predicted u is not the same. I'm thinking I must have got lost

with some simple thing. Could anyone give some hint? Thanks in advance!

At the bottom of the result from --xtreg,fe stata reports sigma_u. I'm

thinking it means the standard deviation of u(fixed effect). Please

correct me if I'm wrong here. Then, I use --predict u,u to get variable

u. But the standard deviation of u is not the same as sigma_u. I think

either I misunderstand sigma_u's meaning or predicted u's meaning. Any

comments is highly appreciated.

webuse grunfeld

xtreg invest mvalue kstock,fe

predict u, u

egen oneu = tag(company)

su u if oneu

There are only ten unique values of u_i. Their s.d. is indeed the same as that reported by sigma_u.

Kit Baum, Boston College Economics and DIW Berlin

http://ideas.repec.org/e/pba1.html

An Introduction to Modern Econometrics Using Stata:

http://www.stata-press.com/books/imeus.html

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