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  • Is there a rule of thumb regarding low within-FE variation?

    Dear all, could you please educate me regarding when we say the within-FE-group variation of explanatory variables is too low to have reliable estimates?
    I intend to specify an OLS model with industry fixed effect. Below tabulates the pooled and within-FE variations of a set of explanatory variables.
    Do you think low within-FE variation is an issue for my analyses?
    Thank you!
    Pooled Sample Summary Statistics Within-FE (ioSecTRG) Summary Information (among 13 groups)
    N Mean Std. Dev. Singletons # of FE groups excluding singletons Zero Within-FE Variation Within-FE Std. Dev. Within-FE Std. Dev. รท Pooled Std. Dev.
    High 502 0.50 0.50 2 11 1 0.20 39%
    Complem 502 0.99 0.18 2 11 0 0.11 59%
    GeoDist 502 5.75 2.17 2 11 0 0.65 30%
    CBank 502 0.02 0.15 2 11 5 0.04 27%
    CAudit 502 0.24 0.42 2 11 3 0.11 27%
    AcqSize 502 8.55 1.83 2 11 0 0.72 39%
    AcqRunup 502 0.00 0.11 2 11 0 0.01 13%
    AcqQ 502 1.75 1.01 2 11 0 0.56 56%
    AcqReturn 502 0.04 0.28 2 11 0 0.07 25%
    TrgSize 502 6.45 1.68 2 11 0 0.60 36%
    TrgRunup 502 0.04 0.19 2 11 0 0.02 12%
    TrgQ 502 1.77 1.23 2 11 0 0.63 52%
    TrgReturn 502 0.00 0.42 2 11 0 0.08 20%
    Cash 502 0.37 0.48 2 11 2 0.25 51%
    Stock 502 0.25 0.43 2 11 5 0.19 44%
    Compete 502 0.04 0.20 2 11 5 0.05 25%
    Tender 502 0.17 0.37 2 11 7 0.18 48%
    Crisis 502 0.09 0.28 2 11 7 0.05 19%
    PostCrisis 502 0.68 0.47 2 11 2 0.09 20%

  • #2
    Chan:
    as for all the R_square (and pseudo cousins) that populate the regression realm, there's no such a hard and fast rule: most depends on what values are "reasonable" in different research fields.
    As far as the fixed effect estimator is concerned, once it has wiped out al the time-invariant variables, what remains should have "enough" (again, whatener this may mean in different research fields) variation to lame it work at its best.
    Kind regards,
    Carlo
    (StataNow 18.5)

    Comment


    • #3
      Originally posted by Carlo Lazzaro View Post
      Chan:
      as for all the R_square (and pseudo cousins) that populate the regression realm, there's no such a hard and fast rule: most depends on what values are "reasonable" in different research fields.
      As far as the fixed effect estimator is concerned, once it has wiped out al the time-invariant variables, what remains should have "enough" (again, whatener this may mean in different research fields) variation to lame it work at its best.
      Got it. Thank you for insights, Carlo. Highly appreciated.

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