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st: residual in the same specification
From
"Khieu, Hinh" <[email protected]>
To
"[email protected]" <[email protected]>
Subject
st: residual in the same specification
Date
Fri, 11 Mar 2011 18:43:15 -0600
Dear statalist members,
I have a dependent variable derived as the residual of a regression below:
(1) Y = f(control variables, called X's) - dep and independent all at time t.
Then, I run the following regression:
(2) Residual from (1) above = f(same control variables above + 2 new variables of interest) - this time, all dependent and independent variables are at time t+1.
Could someone tell me what could be wrong with regression (2)?
In particular,
Question 1: is the residual serving as dependent variable in (2) supposed to be orthogonal to the set of control variables X's theoretically? Note that they are at 2 different times and that in reality, the results from regression (2) still show significant coefficients of a bunch of X's.
Question 2: what if regression (2) is also at time t?
I greatly appreciate any help in explaining the problem.
Thanks,
Hinh
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