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Re: st: cnsreg-Constrained Weighted OLS

From   Maarten Buis <>
Subject   Re: st: cnsreg-Constrained Weighted OLS
Date   Wed, 21 Dec 2011 20:53:48 +0100

On Wed, Dec 21, 2011 at 7:46 PM, Martin wrote:
> I have following problem. I try to run a regresion like this:
> y=b0 + b1*w1*x1+b2*w2*x2 +b3*w3*x3+b4*w4*x4
> b0=intercept, b1,b2,b3,b4 Regressors w(i) Weights of the Variable X(i). In
> my problem these w are market values of a country and x are Dummies (if
> y=stock return is of this country). So because of multicolinearity I have to
> put 2 constraints:
> (1) w1*b1+w2*b2=0
> (2) w3*b3+w4*b4=0

Are the weights observed or do you want to estimate them? If they are
abserved, just create new variables that are the products of the xs
and their weights. In that case no constraints are necessary. If they
are to be estimated, see <>.

Hope this helps,

Maarten L. Buis
Institut fuer Soziologie
Universitaet Tuebingen
Wilhelmstrasse 36
72074 Tuebingen
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