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From |
Christopher Baum <kit.baum@bc.edu> |

To |
<statalist@hsphsun2.harvard.edu> |

Subject |
st: re: 3sls and fixed effects |

Date |
Sat, 16 Oct 2010 13:53:21 -0400 |

<> Biljana said I have some lagged values in regression - could that be the problem? This is what I have & get: . xi: reg3 (DeltaDebt CashFlow dQ size DeltaCashHold debt_lag1 i.gvkey_n i.fyear) (DeltaCashHold CashFlow dQ size DeltaDebt cashhold_lag2 i.gvkey_n i.fyear), endog(DeltaDebt DeltaCashHold) i.gvkey_n _Igvkey_n_1017-103307(naturally coded; _Igvkey_n_1017 omitted) i.fyear _Ifyear_1971-2001 (naturally coded; _Ifyear_1971 omitted) 1st stage failure. Equation: DeltaDebt CashFlow dQ size debt_lag1 _Igvkey_n_1056 _Igvkey_n_1058 _Igvkey_n_1093 _Igvkey_n_1124 _Igvkey_n_1234 _Igvkey_n_1248 _Igvkey_n_1283 _Igvkey_n_1284 _Igvkey_n_1327 _Igvkey_n_1350 _I Stata doesn't know that those are lagged variables, so that can't be a problem. I think what you may be running into is a constraint arising because of the number of regressors. How many values of gvkey_n are there in the estimation sample? (You can use -levelsof- to get a list, and an extended macro function to count the number). If you are estimating two equations, each with a full set of firm and time dummies, the covariance matrix is of the order 2*((G-1) + (T-1)) where G=number of firms and T=number of periods. if the number of firms is large, you may be running up against a matsize constraint (I've never seen the error message '1st stage failure'). As you do not have a dynamic system, you could manually demean each of the variables via the within transformation and run the regression on the within-transformed variables. I believe Ben Jann's -center- on SSC will do the centering transformation under by-group control (by gvkey_n), which would be cleaner than using egen, mean() with by. Kit Kit Baum | Boston College Economics & DIW Berlin | http://ideas.repec.org/e/pba1.html An Introduction to Stata Programming | http://www.stata-press.com/books/isp.html An Introduction to Modern Econometrics Using Stata | http://www.stata-press.com/books/imeus.html * * 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: RE: re: 3sls and fixed effects***From:*"Biljana Dlab" <dlab@isb.uzh.ch>

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