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Re: st: chow test multicollinearity


From   Ronan Conroy <rconroy@rcsi.ie>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   Re: st: chow test multicollinearity
Date   Sat, 26 Feb 2011 11:57:41 +0000

On 26 Feb 2011, at 08:49, <fabio.zona@unibocconi.it> <fabio.zona@unibocconi.it> wrote:

> 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.


You need to think your way out of this one. Stata will be of almost no use. 

Putting collinear variables into a model requires a lot of data, because the precision of estimate is degraded badly by the collinearity. An alternative is to chose among variables that measure the same thing and pick the one which means most in terms of the underlying theory. I suggest that this is your best route.



Ronán Conroy
rconroy@rcsi.ie
Associate Professor
Division of Population Health Sciences
Royal College of Surgeons in Ireland
Beaux Lane House
Dublin 2


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