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st: time trend in a panel data with very SHORT time dimension?


From   Jun Zhou <Jun.Zhou04@Rotman.Utoronto.Ca>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   st: time trend in a panel data with very SHORT time dimension?
Date   Thu, 12 Feb 2009 20:17:05 -0500

Dear all, 

I have an unbalanced panel dataset with 5 years observations from 2000 firms. 
I would like to test whether there is a positive time-trend in one variable (e.g. expense). 
I tried the following two ways:
       xi: areg expense year, absorb(FirmID) cluster(FirmID)
       reg expense year, cluster(FirmID)
Both methods show that the slope (i.e. the coefficient of 'year') is positive and statistically significant. Can I conclude that there is a positive time trend in variable 'expense'? 

I understand that it is improper to try to test time trend in a time series of 5 observations, but I am not sure whether 2000 firms can allow me to test the time trend although each firms have no more than 5 observations. 

Thanks a lot for your help. 
Jun 


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