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RE: st: fixed effects with multicollinearity


From   "Reddy, Colin" <[email protected]>
To   "[email protected]" <[email protected]>
Subject   RE: st: fixed effects with multicollinearity
Date   Fri, 29 Jul 2011 09:07:56 +0000

Thanks Daniel
So I guess the best is to drop one of the collinear variables.?

Colin ________________________________________

From: [email protected] [[email protected]] on behalf of daniel klein [[email protected]]
Sent: 29 July 2011 11:01 AM
To: [email protected]
Subject: Re: st: fixed effects with multicollinearity

Colin,

please note that mean centring does nothing to solve the underlying
problem of collinarity (if there is something like that)., see e.g.
Echambadi and Hess (2007) or Shieh, G. (2011).

However, in another post
(http://www.stata.com/statalist/archive/2011-04/msg01204.html) Maarten
Buis pointed out that in the special case, where a variable is
interacted with itself, to model non-linearities, centering can help.


Echambadi and Hess (2007). Mean-Centering Does Not Alleviate
Collinearity Problems in Moderated Multiple Regression Models.
Marketing Science, 26: 438-445

Shieh, G. (2011). Clarifying the role of mean centring in
multicollinearity of interaction effects. British Journal of
Mathematical and Statistical Psychology, 64: 1-12

Best
Daniel
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