re:RE: st: why reg3 dropped constant term ?

[Christopher Baum <kit.baum@bc.edu>]

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Here is what I have typed in Stata and the Stata estimated output.

Manually (using hand to type in Stata command window,

reg3 (Leverage: d.lvr=l.lvr d.rwar roa llpta lta liq hhi y_2 y_3 y_4 y_5 y_6 y_7 y_8) (Prisk: d.rwar = l.rwar d.lvr llpta liq lta hhi y_2 y_3 y_4 y_5 y _6 y_7 y_8), small


Note that:  
D.cbf and D.rwar are the only two endogenous variables in this model, and that all other variables are   considered to be exogenous in this model.



Try estimating each of these equations via single-equation methods such as -ivregress 2sls- to better diagnose the issues with collinearity. Do y_2-y_8 comprise a complete set of year dummies (or is there an excluded y_1)? 

Keep in mind that with each equation estimated with a first difference as the response variable, a constant term would constitute a linear trend coefficient in the level of the response variable. Do you really mean to test for the existence of such a linear trend in levels?

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


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