Calculating difference between observations

[Eefke Seelen]

Hi everybody,

I want to calculate the difference between MF y and MF y-1, I want to calculate it with the (new-old/old) formula. However when i type the following command:

gen changeMF = (MF - MF[n-1]) / MF[n-1]
it calculates something, but it is not the percentual change in MF.
I want to calculate it per firm, that does not work either.
Can someone help me?

Thanks in advance

[Nick Cox]

If you really typed

gen changeMF = (MF - MF[n-1]) / MF[n-1]

then presumably there is one and only one variable or scalar whose name begins with n and it was used for calculation. To understand how that works, consider these results:

. sysuse auto, clear
(1978 Automobile Data)

. gen weight2 = weight[mpg]

. l weight* in 1/2

     +------------------+
     | weight   weight2 |
     |------------------|
  1. |  2,930      3600 |
  2. |  3,350      3220 |
     +------------------+

. di weight[22]
3600

. di weight[17]
3220

You may have meant

gen changeMF = (MF - MF[_n-1]) / MF[_n-1]

although something like

tsset firm year
gen change MF = (MF - L.MF) / (L.MF)

is much, much better, not least to avoid nonsensical calculations relating the first value for one form to the last value of the previous firm.

[Liam Clegg]

I don't know what your application is, but in economic applications it usually makes more sense to take logs and interpret their difference as a percentage change than to calculate a literal percentage change. So:

tsset firm year
gen lnMF = ln(MF)
gen changeMF = D.lnMF