Hi all,
I want to run a regression between annual expense and sales, including a fixed effect for each firm (firm_code).
I came across the codes:
proc glm;
absorb firm_code;
model expense = sales / solution noint;
run;
quit;
However, I am using a panel data including 4 years of observations for each firm. This means for each firm (firm_code) there will be four observations of expense and sales.
As a result, I only need to create on dummy variable for each firm, I am not sure whether the command "absorb" does that, or does it create a dummy variable for every line of observation for firm?
If there is any better ways of running fixed effects regression, please tell me
Thank you in advance!
Paul Allison has a wonderful book on fitting fixed effects models of various types - ordinary regression (normal response), logistic, Poisson, and survival (Cox) models. Here is the reference and a link to it:
Fixed Effects Regression Methods for Longitudinal Data Using SAS (Allison, P., SAS Institute, 2005)
Actually, you don't have to create a dummy variable for each firm, just be certain that the dataset is sorted by firm_code. GLM will automatically nest the observations within firm_code, and perform the regression. And provided you don't need predicted values or regression diagnostics, you get all this with a marked reduction in overhead computational resources.
Now if you want a regression for EACH firm_code (sort of implied in the first line of your post), either a BY statement or something like:
proc glm;
class firm_code;
model model expense = sales|firm_code / solution noint;
quit;
This would give separate intercepts and slopes for each firm_code, but assumes common residual variance across firm_codes
Steve Denham
Message was edited by: Steve Denham
Hi Steve,
Sorry for the misunderstanding. I have a panel of annual data for different firms over several years of time. I just need to run one regression for the entire panel. However, I do need to control for firm fixed effect for each individual firm (presumably by adding a dummy variable for each firm - e.g. dummy A equals to 1 for firm A 2010, 2011, and 2012).
Thank you for your help!
Then ABSORB looks like your best tool to accomplish that.
Steve Denham
@SteveDenhamCurrently I am doing exactly what you have mentioned. I am trying to run fixed effect regression. In first step I need to run regression on every firm-year (each year of each firm individually) and then using the intercept of that regression in second regression.
I tried to run your code:
proc glm;
class firm_code;
model model expense = sales|firm_code / solution noint;
quit;
I guess writing model two times was unintentional. So I change you codes as follow;
proc glm data=dtab2;
class count; * where count is unique number for each firm year;
model exret = Mktrf | count / solution noint; *where exret=excess return, Mktrf=Market return;
output out=xglm p=predicted;
quit;
Results show this error
ERROR: Number of levels for some effects > 32767.
Also I tried to run proc reg/proc panel/proc tscs/ but the problem is:
if I don't specify by variable, I get reg output of whole model as one (row) observation having intercept and coefficient for all firms
if I specify by variable for both time series (macc=unique for each time obs) and cross-sectional (permno) variable, it seems my model is over specified,
>proc reg give infinite error for each firm-year (number of nonmissing values are ....)
>proc panel give error (Event Stack Underflow caused by mis-matched begin and end event call in SAS)
if I reg by count(proc reg data=dtab2 outest=xreg noprint; by count; model exret = Mktrf / adjrsq; quit;) then beta & RMSE ave no values and intercept are generated exactly of similar value as exret (dep variable) itself.
Kindly suggest me any solution to this problem.
Paul Allison has a wonderful book on fitting fixed effects models of various types - ordinary regression (normal response), logistic, Poisson, and survival (Cox) models. Here is the reference and a link to it:
Fixed Effects Regression Methods for Longitudinal Data Using SAS (Allison, P., SAS Institute, 2005)
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