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From |
itchiftc@rumms.uni-mannheim.de |

To |
statalist@hsphsun2.harvard.edu |

Subject |
st: Why is the adj. R-squared lower with time FE than with time & firm FE? |

Date |
Tue, 29 Sep 2009 14:27:53 +0200 |

Dear Statlist,

Equation #1 includes both company and time fixed effects: -xtreg y x1 x2 x3 timedummy2-timedummy9, fe cluster(firmid) whereas Equation #2 has only time fixed effects: -reg y x1 x2 x3 timedummy2-timedummy9, cluster(firmid).

I found a thread with very comprehensive explanation on panel data R-squared: http://www.stata.com/statalist/archive/2006-03/msg00180.html stating in the end that "In the -xtreg, fe- calculation, we are washing out the explanatory effects of the intercepts."

Thanks, Ida * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**st: AW: Why is the adj. R-squared lower with time FE than with time & firm FE?***From:*"Martin Weiss" <martin.weiss1@gmx.de>

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