Dummy variable in panel

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nguyentuanvu
Posts: 5
Joined: Fri Sep 27, 2013 2:38 am

Dummy variable in panel

Postby nguyentuanvu » Mon Nov 18, 2013 12:28 am

I have a fixed-effect model
log(cash) = f(cf, nwk, log(size), rdev, political, svtraded)
Where
Political is a dummy that equal 1 if company is indentifed as politically connected and zero otherwise.
Svtraded is the ratio of the stock value traded to GDP that varies over time but constant for all company.
When I run this model, Eviews announced "Near singular matrix"
Can you help me?
I attached my data here.
Attachments
mh1.xlsx
(36.86 KiB) Downloaded 350 times

startz
Non-normality and collinearity are NOT problems!
Posts: 3796
Joined: Wed Sep 17, 2008 2:25 pm

Re: Dummy variable in panel

Postby startz » Mon Nov 18, 2013 5:28 am

Is the dummy constant for each firm?

nguyentuanvu
Posts: 5
Joined: Fri Sep 27, 2013 2:38 am

Re: Dummy variable in panel

Postby nguyentuanvu » Mon Nov 18, 2013 10:02 am

No, Political equals 1 for several firm and equal 0 otherwise, and Svtraded varies over time but constant for all company. For expamle, in 2008, Svtraded equals 20, in 2009, Svtraded equals 30, but in 2008 it equals 20 for all company

EViews Gareth
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Re: Dummy variable in panel

Postby EViews Gareth » Mon Nov 18, 2013 11:35 am

If you run the model without fixed effects, does it estimate?

startz
Non-normality and collinearity are NOT problems!
Posts: 3796
Joined: Wed Sep 17, 2008 2:25 pm

Re: Dummy variable in panel

Postby startz » Mon Nov 18, 2013 11:37 am

If political is always the same for a given firm, you're in the dummy variable trap.

nguyentuanvu
Posts: 5
Joined: Fri Sep 27, 2013 2:38 am

Re: Dummy variable in panel

Postby nguyentuanvu » Tue Nov 19, 2013 3:16 am

But if I run without fixed-effect, I have to create many dummy variables. Can u give me another way. Here is the literature that I'm studying. Thanks for your help.
Attachments
Cash holding of politically connected firms.pdf
(459.84 KiB) Downloaded 447 times

startz
Non-normality and collinearity are NOT problems!
Posts: 3796
Joined: Wed Sep 17, 2008 2:25 pm

Re: Dummy variable in panel

Postby startz » Tue Nov 19, 2013 7:25 am

Perhaps you want to read up on the dummy variable trap. You seem to want to do something that is impossible. It has nothing to do with EViews per se.


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