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# Re: st: chow test multicollinearity

 From Fabio Zona To statalist@hsphsun2.harvard.edu Subject Re: st: chow test multicollinearity Date Sat, 26 Feb 2011 12:34:30 +0100 (CET)

```Note: a specification on my previous e-mail (see below): I already standardized the variables prior running the regression; however after interacting these standardized variables, collinearity emerges.

Hence, this is a case of variables that need to be tested (as per theoretical model), but the interactions of their (standardized) values are higly collinear

thanks

Hi,

I run a chow test by running a single regression with dummy variables.
The F statistic is significant; however, the interacted terms are strongly multi-collinear.

What should I do in these case?

a) is the chow test run through interacted terms (i.e. in one single regression) affected by the presence of multicollinearity among interacted terms?

b) I think that, given multicoolinearity, I cannot trust significance of interacted coefficiencts, and hence cannot say that the predictors are different in the two subgroups; correct?

c) is there a way to solve the multicollinearity?

d) I know the command orthog to solve multicollinearity; however, can I apply this command after a predictor is squared? That is,
---- first calculate the standardized values of X
---- then get the square of this standardized value
---- calculate the product of each of these two variables with a moderator Q
---- and THEN using "orthog"  on the values already standardized and interacted
(i.e., orthog  z_X   z_Xsquare   Q   z_X*Q   z_Xsquare*Q  )
I fear this procedur might bias results. What do you think?

e) since my problem is with multicollinearity affecting interactions, could I get the chow test from moderated regressions, and attributing this chow test to coefficients gotten in separate regressions?

Thanks

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