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st: Overlapping observations in a panel


From   Malcolm Wardlaw <malcolm@wardlaw.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: Overlapping observations in a panel
Date   Wed, 14 Oct 2009 11:45:57 -0500

I have a general question about how to handle overlapping observations  
in a fixed (or random) effects panel regression.  Specifically, I have  
quarterly observations of investment, cash flow, and a number of other  
variables.  The model specifies a yearly relationship where investment  
in a specific product line over the 12 months is dependent on the cash  
flow over the same period and the asset base at the beginning of the  
12 month period.

If I simply run the regression with all of the observations, I must be  
double counting information.  It seems like I only have 1 real  
independent observation for every 4 quarterly observations.  What is  
the meaningful way to adjust the estimation to take this into  
account?  The reason I don't simply drop the 1-3 quarter observations  
is that I later end up matching the quarters to yearly data in another  
sample and I want to be able to compare the data.

Is there a general understanding of how this type of estimation works?

Malcolm

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