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st: RE: Comparing fixed effect regression coefficients between two groups

From   "Schaffer, Mark E" <[email protected]>
To   <[email protected]>
Subject   st: RE: Comparing fixed effect regression coefficients between two groups
Date   Mon, 17 Jan 2011 14:07:44 -0000


> -----Original Message-----
> From: [email protected] 
> [mailto:[email protected]] On Behalf Of 
> Dominik Hennen
> Sent: 17 January 2011 13:36
> To: [email protected]
> Subject: st: Comparing fixed effect regression coefficients 
> between two groups
> Dear all,
> I have estimated a fixed effect panel regression model for 
> two groups in my data set. In particular I compare high 
> frequent stock trader with low frequent stock trader. In a 
> second step I want to test if the coefficients, in particular 
> the alpha return (the "constant" in the Carhart four factor 
> model)are significantly different for both groups. The 
> "suest" command does not work for xtreg. An alternative would 
> be to include dummmies, however as I have more than 6000 
> investors this option doesn't work either.
> Is there any command/approach to compare coefficients between 
> two groups which were estimated via fixed effects?

If you apply the within transformation (i.e., demean your data) by hand,
you can obtain the FE coefficients using -regress-.  Ben Jann's -center-
command (available from ssc archives in the usual way) is an easy way to
implement the within transformation.

The vcv, error variance and SEs after using -regress- on demeaned data
will be wrong (too small) since the degree of freedom won't incorporate
the loss of dfs because of the FEs.  But if you use the undocumented
-dof- option of -regress-, you can impose the right degrees of freedom
on the estimation on the demeaned data.

Here's an example:


webuse abdata, clear

* Note the degrees of freedom = 890
xtreg n w, fe

* Apply centering to the same sample
by id: center n w if e(sample)

* Force dof to be 890
reg c_n c_w, dof(890) nocons


Do this for both your FE estimations and then use -suest-, as you


> I highly appreciate your help
> With best regards
> Dominik
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