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# Re: st: Fixed Effects inconsistency between Correlation and Coefficient Direction

 From Steve Samuels To statalist@hsphsun2.harvard.edu Subject Re: st: Fixed Effects inconsistency between Correlation and Coefficient Direction Date Mon, 19 Apr 2010 12:25:07 -0400

```Here's a data set that qualitatively reproduces the phenomenon you
describe. Note the relatively large between-id variation compared to

Steve
**************************CODE BEGINS**************************
clear
input  id x
`1     1
1     2
1     3
2     4
2     5
2     6
3     7
3     8
3     9
end
set seed 123456
gen y = 10*id -x + rnormal(0,1)
xtset id
list
corr y x
xtreg y x, fe
xtreg y x, re
***************************CODE ENDS***************************

On Sun, Apr 18, 2010 at 1:42 PM, MICHAEL ESPOSITO <mespo12@optonline.net> wrote:
> I have a question that I cannot seem to find an answer to. I am attempting
> to use the fixed effects model for research that I am conducting for my
> dissertation. My committee and I discovered that in certain circumstances
> the results do not seem logical. For instance, the correlation matrix
> indicates a positive relationship between two variables and then when we run
> the Fixed Effects Linear Regression model using the same two variables, the
> coefficient indicates a negative relationship.  I suspect that it may be
> related to something I read that stated that the fixed effects model has the
> tendency to drop a significant amount of data in the independent variable
> when the data is perceived as having a high degree of randomness.
>
> The correlation matrix suggests a positive relationship .2663 and the
> coefficient correlation indicates a negative -1491.  When I run the same
> variables using the linear regression model with the Mixed Effects
> variation, all findings suggest a positive relationship. Does anyone know
> what could be causing this strange occurrence? Any advice or guidance you
> can provide would be most appreciated.

--
Steven Samuels
sjsamuels@gmail.com
18 Cantine's Island
Saugerties NY 12477
USA
Voice: 845-246-0774
Fax:    206-202-4783

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```