Dear stata forum,
I'm currently working on my final thesis and I got the following setting:
- Panel dataset with 172,000 firm year observations
- I got Interaction terms consisting of a dummy variable that equal one under certain conditions multiplied with cash flow of the specific firm of the specific year (N when dummy ==1 equals is 27062)
- I'm doing an fixed effect regression with xtreg, trying to predict whether the existence of this certain condition has an influence on my dependet variable Investment
Investment = b1*CF + b2*(interaction term= CF*dummy) + b3*controls + u
However when I'm running the regression in stata it's allways insignificant. I tried various settings and definition of the interaction terms but t values are always very low or near 0, indicating that adding the interaction term to my regression does not explain anything of my dependet Variable.
I think that the insignificance has someting to do with the distribution of the subsample of the interaction term and the numbers of observations. When I'm running my model only for the different subsamples in a sample split (when the dummy is one and when its zero) with:
Investment = b1*CF + b2*controls if dummy==1
b1 is significant and lower than in
Investment = b1*CF + b2*controls if dummy==0
My first question is the following: Why is my interaction term always insignificant ? I know this can have a lot of causes but I think (as written above) that it has something to do with different distributions that are mixed up.
My second question is: Can I get a usefull statement when I'm estimation the equation for the different subsamples like formulated above?
I'm really confued here and I hope that someone can explain me what is going wrong.
Thanks a lot for your help!
regards
Johann
I'm currently working on my final thesis and I got the following setting:
- Panel dataset with 172,000 firm year observations
- I got Interaction terms consisting of a dummy variable that equal one under certain conditions multiplied with cash flow of the specific firm of the specific year (N when dummy ==1 equals is 27062)
- I'm doing an fixed effect regression with xtreg, trying to predict whether the existence of this certain condition has an influence on my dependet variable Investment
Investment = b1*CF + b2*(interaction term= CF*dummy) + b3*controls + u
However when I'm running the regression in stata it's allways insignificant. I tried various settings and definition of the interaction terms but t values are always very low or near 0, indicating that adding the interaction term to my regression does not explain anything of my dependet Variable.
I think that the insignificance has someting to do with the distribution of the subsample of the interaction term and the numbers of observations. When I'm running my model only for the different subsamples in a sample split (when the dummy is one and when its zero) with:
Investment = b1*CF + b2*controls if dummy==1
b1 is significant and lower than in
Investment = b1*CF + b2*controls if dummy==0
My first question is the following: Why is my interaction term always insignificant ? I know this can have a lot of causes but I think (as written above) that it has something to do with different distributions that are mixed up.
My second question is: Can I get a usefull statement when I'm estimation the equation for the different subsamples like formulated above?
I'm really confued here and I hope that someone can explain me what is going wrong.
Thanks a lot for your help!
regards
Johann
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