topic Interpretation of intercept-only fixed effect model in SAS Forecasting and Econometrics https://communities.sas.com/t5/SAS-Forecasting-and-Econometrics/Interpretation-of-intercept-only-fixed-effect-model/m-p/642886#M3827 <P>Suppose we have a fixed effect model for a panel of i firms and t periods. The model includes a fixed effect for the firms i and a constant as the independent variables and some dependent variable (say e.g. firm cashflows). No further independent variables! Put differently, it is an intercept only fixed effects model.</P><P>&nbsp;</P><P>How do we interpret the constant (intercept) in this model? Without the fixed effect, the constant would simply be the average of the dependent variable across firms i and periods t. But what does the fixed effect change exactly?</P> Sat, 25 Apr 2020 16:04:45 GMT shenflow 2020-04-25T16:04:45Z Interpretation of intercept-only fixed effect model https://communities.sas.com/t5/SAS-Forecasting-and-Econometrics/Interpretation-of-intercept-only-fixed-effect-model/m-p/642886#M3827 <P>Suppose we have a fixed effect model for a panel of i firms and t periods. The model includes a fixed effect for the firms i and a constant as the independent variables and some dependent variable (say e.g. firm cashflows). No further independent variables! Put differently, it is an intercept only fixed effects model.</P><P>&nbsp;</P><P>How do we interpret the constant (intercept) in this model? Without the fixed effect, the constant would simply be the average of the dependent variable across firms i and periods t. But what does the fixed effect change exactly?</P> Sat, 25 Apr 2020 16:04:45 GMT https://communities.sas.com/t5/SAS-Forecasting-and-Econometrics/Interpretation-of-intercept-only-fixed-effect-model/m-p/642886#M3827 shenflow 2020-04-25T16:04:45Z Re: Interpretation of intercept-only fixed effect model https://communities.sas.com/t5/SAS-Forecasting-and-Econometrics/Interpretation-of-intercept-only-fixed-effect-model/m-p/642895#M3828 <P>The fixed effect plus the intercept estimates the mean response for each firm. Simple example, heights of people by gender</P> <P>&nbsp;</P> <P>Intercept&nbsp; 67.5</P> <P>Males 5</P> <P>Females 0</P> <P>&nbsp;</P> <P>Thus, the estimated mean height for males is 72.5.</P> Sat, 25 Apr 2020 16:27:21 GMT https://communities.sas.com/t5/SAS-Forecasting-and-Econometrics/Interpretation-of-intercept-only-fixed-effect-model/m-p/642895#M3828 PaigeMiller 2020-04-25T16:27:21Z