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Re: st: relative importance of independent variables


From   Richard Williams <richardwilliams.ndu@gmail.com>
To   statalist@hsphsun2.harvard.edu, statalist@hsphsun2.harvard.edu
Subject   Re: st: relative importance of independent variables
Date   Tue, 14 Jun 2011 12:24:05 -0500

At 07:26 AM 6/14/2011, Maarten Buis wrote:
On Tue, Jun 14, 2011 at 2:04 PM, Stefan Nijssen wrote:
> I am running an OLS, see below, in which I relate 3 variables (currentratio, margin and da) to OAS, all continuous. I control for industry and country (twice a triple dummy, added to the equation). Seems to perform reasonably well to me. However, I have one last issue to overcome. I would like to determine the relative importance to the model, and especially the hierarchy of this importance, of the three independent variables currentratio, margin and da. Probably this is task must be doable but I cant seem to find a proper way through any academic articles or google.

This is a problem of standardization; you must make sure that these
three variables have the same unit. A common strategy is to divide
each variable with its standard deviation, so now all effects are the
effects of one standard deviation increase. See e.g. the -beta- option
in -regress-. Whether that makes sense is a substantive question.

Hope this helps,
Maarten

The -beta- option will standardize the dependent variable as well. X-Standardization alone may be sufficient. The -listcoef- command, which is part of the Long and Freese -spost9- package (use -findit-) has handy options for various kinds of standardization.


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