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From |
"Biljana Dlab" <dlab@isb.uzh.ch> |

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

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

Date |
Sat, 16 Oct 2010 20:31:21 +0200 |

Hi Kit, The size is following: Number of unique values of gvkey_n is 615 Number of records is 6492 I have totally 6492 firm-year observations. The time period is 30 years (fyears) That gives me matrix of: 2*((G-1) + (T-1)) 2*(614+29)=1286 Is that too large? Thank you for your patience. Best, Biljana -----Original Message----- From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Christopher Baum Sent: 16 October 2010 19:53 To: statalist@hsphsun2.harvard.edu Subject: st: re: 3sls and fixed effects <> 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/ * * 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/

**References**:**st: re: 3sls and fixed effects***From:*Christopher Baum <kit.baum@bc.edu>

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