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st: RE: Regression with Year Dummy Variables


From   Mauro Mastrogiacomo <M.Mastrogiacomo@cpb.nl>
To   "'statalist@hsphsun2.harvard.edu'" <statalist@hsphsun2.harvard.edu>
Subject   st: RE: Regression with Year Dummy Variables
Date   Tue, 23 Aug 2011 17:04:25 +0200

Vinod,
I check first whether the collinearity might be due to the fact that one variable (one of the other regressors) is missing in one year. That is to say check whether one entire year as a whole does not enter the estimating sample.
If this is not the case, and for some strange reasons you need to use T-2 time dummies, I would choose which dummies to drop, say the first two years. The remaining coefficients are then interpreted as the time effects relative to the two excluded years.
Mauro

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-
> statalist@hsphsun2.harvard.edu] On Behalf Of Venkiteshwaran, Vinod
> Sent: dinsdag 23 augustus 2011 16:54
> To: statalist@hsphsun2.harvard.edu
> Subject: st: Regression with Year Dummy Variables
> 
> I have a question about interpreting coefficients on year dummy
> variables. I have a panel with 20 years and have dropped one dummy, the
> first year, and Stata drops an additional year, the last year, because
> I have a variable that is collinear with the year dummies. How should
> the coefficients on the remaining year dummies be interpreted? Does it
> matter if the years that are dropped are the first two or the last two
> or on either end of the sample?
> 
> Dr.Vinod Venkiteshwaran
> Assistant Professor of Finance
> OCNR 352, College of Business
> Texas A&M University
> Corpus Christi TX 78412
> Ph: 361-825-3619
> Email: vinod.venkit@tamucc.edu
> 
> 
> 
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