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RE: st: Creating an index

From   Ozgur Ozdemir <>
To   Stata <>
Subject   RE: st: Creating an index
Date   Sun, 13 May 2012 15:30:31 +0000

Hi Nick,
thanks for your quick response. I have already written a chapter on the impact of board structure on firm performance which include board specific data such as board size, number of independent directors etc. In the next chapter, I would like to introduce a variable called "Governance Index" then research association between the governance index and some other firm level characteristics. Therefore, I need a single measure to proxy governance as it will be a dependent variable in chapter 2. therefore, I cannot in chapter 2 argue that I reduced the number of variables and used factor analysis as it will bring suspects about a multicollineratiy problem for Chapter 1 however was not a case at all. So, I need to get this index in a different way.  i found sheafcoef but not sure if it might help. thanks, ozgur

> Date: Sun, 13 May 2012 16:20:40 +0100
> Subject: Re: st: Creating an index
> From:
> To:
> I don't understand what you have in mind here. If you have a simple
> rule to create an "index", then it should be easy to implement it in
> Stata. By the way, it seems to me that all methods of summarizing
> several variables by one will only work well to the extent that there
> is correlation between variables. So any implication that correlation
> is somehow a problem or a limitation is completely backwards.
> Nick
> On Sun, May 13, 2012 at 2:03 PM, Ozgur Ozdemir <> wrote:
> I am using Stata 10 and would like to create an index based on 4
> variables. However, I do not want to use factor analysis as it implies
> that there is correlation between the variables. Is there any way of
> creating an index on stata ? Is there any way to create ranges of four
> variables such as good, average etc and then assuming that all the
> good ones can be called A, then B etc?
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