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st: Problems with Fixed Effects Regression


From   Abubakr Saeed <abubakr.sd@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: Problems with Fixed Effects Regression
Date   Mon, 30 May 2011 10:45:32 +0100

Dear Statalisters,

I'm performing a panel data analysis (400 firms, 12 years, and 6
industries). I got two questions regarding my analysis:
My LM test supports for random individual effects. After estimating
the Hausman test for deciding between fixed or random effect
regression, result was in favor of the fixed effect regression. I am
using Industry dummies which are constant over time. While running FE
my all industry dummies were dropped because of collinearity. What I
do? Should I just neglect industry dummies or choose random effect?

My second question is my sample’s total size is 400, which comprised
of almost 385 listed firms and 15 unlisted firms. Do I need to use a
dummy for Listed as well, because in that case, I have tried it and FE
dropped it because of collinearity. And do I need to perform the
Heckman sample selection bias, for such sample?

I really appreciate any help.

Saeed, Abubakr

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