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st: RE: Persistency measurement on unbalanced panel (dynamic panel regression)


From   "Martin Weiss" <martin.weiss1@gmx.de>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: Persistency measurement on unbalanced panel (dynamic panel regression)
Date   Sun, 7 Feb 2010 11:06:17 +0100

<>


First thought: This is a multidisciplinary list, so spelling out ROE as
"Return on Equity" may make sense.

You may want to look at Roodman´s comprehensive article in the SJ
http://www.stata-journal.com/article.html?article=st0159
The warning you complained about can be found three times in there...


HTH
Martin

-----Original Message-----
From: owner-statalist@hsphsun2.harvard.edu
[mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Christian
Stammschulte
Sent: Sonntag, 7. Februar 2010 10:28
To: statalist@hsphsun2.harvard.edu
Subject: st: Persistency measurement on unbalanced panel (dynamic panel
regression)

Dear Stata Users,

I am new to STATA and I am currently trying to investigate profit
persistency patterns.
Given an unbalanced panel, short time periods and 3,000 companies for
investigation with demeaned RoEs I was trying to estimate persistency by
applying xtabond2 with three lags, twostep, robust and orthogonal approach.

However, two questions on this:

(1) I am receiving the error message "Two-step estimated covariance matrix
of moments is singular." Could you briefly explain to me why this is the
case?
(2) My Sargan and Hansen test are showing p-values of 0.0000. Since my
dataset only comprises RoEs/ lags in the model I assume this is the reason.
However, since I am only interested in persistency measurement I start
questioning whether the given procedure it is the right way to do it or
whether I am missing anything? 

You will find the STATA output below.

Any help/ thoughts would be much appreciated.

Best regards and many thanks

Christian


*** STATA Output ***

. xtabond2  demeaned_win99_roae_ L.demeaned_win99_roae_
L2.demeaned_win99_roae_ L3.demeaned_win99_roae_,
gmmstyle(L.demeaned_win99_roae_) twostep robust orthogonal

Favoring space over speed. To switch, type or click on mata: mata set
matafavor speed, perm.
Warning: Two-step estimated covariance matrix of moments is singular.
  Using a generalized inverse to calculate optimal weighting matrix for
two-step estimation.
  Difference-in-Sargan/Hansen statistics may be negative.

Dynamic panel-data estimation, two-step system GMM
----------------------------------------------------------------------------
--
Group variable: id                              Number of obs      =
25084
Time variable : year                            Number of groups   =
3375
Number of instruments = 87                      Obs per group: min =
1
Wald chi2(3)  =   1103.60                                      avg =
7.43
Prob > chi2   =     0.000                                      max =
11
----------------------------------------------------------------------------
--
             |              Corrected
demeaned_w~_ |      Coef.   Std. Err.      z    P>|z|     [95% Conf.
Interval]
-------------+--------------------------------------------------------------
--
demeaned_w~_ |
         L1. |    .539917   .0177421    30.43   0.000      .505143
.5746909
         L2. |   .1872978   .0155508    12.04   0.000     .1568188
.2177768
         L3. |   .0594477   .0123591     4.81   0.000     .0352244
.0836711
             |
       _cons |  -.0004252   .0003175    -1.34   0.180    -.0010475
.0001971
----------------------------------------------------------------------------
--
Instruments for orthogonal deviations equation
  GMM-type (missing=0, separate instruments for each period unless
collapsed)
    L(1/.).L.demeaned_win99_roae_
Instruments for levels equation
  Standard
    _cons
  GMM-type (missing=0, separate instruments for each period unless
collapsed)
    D.L.demeaned_win99_roae_
----------------------------------------------------------------------------
--
Arellano-Bond test for AR(1) in first differences: z = -18.61  Pr > z =
0.000
Arellano-Bond test for AR(2) in first differences: z =  -0.59  Pr > z =
0.557
----------------------------------------------------------------------------
--
Sargan test of overid. restrictions: chi2(83)   = 624.28  Prob > chi2 =
0.000
  (Not robust, but not weakened by many instruments.)
Hansen test of overid. restrictions: chi2(83)   = 248.87  Prob > chi2 =
0.000
  (Robust, but can be weakened by many instruments.)

Difference-in-Hansen tests of exogeneity of instrument subsets:
  GMM instruments for levels
    Hansen test excluding group:     chi2(72)   = 214.50  Prob > chi2 =
0.000
    Difference (null H = exogenous): chi2(11)   =  34.37  Prob > chi2 =
0.000




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