Regression for event study

[Veronique Meertens]

Hello,
I am analyzing the correlation between market cap and abnormal returns of targeted M&A firms, 10 days before the announcement date. My time frame is t-10 untill t-1. My control time frame is t-90 untill t-30.
I currently made this regression code.
reg Cumulated_abn_returns MarketCap TargetDebtRatio BTMValue Cash Liquidity yeardummy's

Is this the right way to do it?
Thank you very much!
Veronique

[Carlo Lazzaro]

Veronique:
welcome to this forum.
For sure your last predictor is not legal, as it should have been coded:
-i.yeardummies- (see -help vocalist- for further details).

[Veronique Meertens]

Thanks for the reply Carlo!
I have the dummies written as you state them, just didn't want to write them all out here in the post. But thanks for the remark.
Any other suggestions about the regression?

Best,
Veronique

[Carlo Lazzaro]

Veronique:
as far as I can get it, your code seems correct.

[Veronique Meertens]

Thanks Carlo,

Someone just told me that I should use xtreg for a panel regression. But my output becomes a bit weird.
Do you know maybe which one i more suitable for this analysis?

[Carlo Lazzaro]

Veronique:
admittedly, weird is a bit meaningless in scientific language.
More substantively, your first post did not provide enough details to advise you to go -xtreg- (which should be your first choice when you're dealing with panel data).
That said, as recommended by FAQ, please post what you typed and what Stata gave you back, so that interested listers can take a look at what's the matter with your results. Thanks.

[xander meertens]

Hi Carlo,

This is the regression used for this problem. xtreg CAR_EVENT Liquidity BTMValue Cash TargetDebtRatio dummy_2005 dummy_2004 dummy_2003 dummy_2006 Same_Industry Firmvalue. Beforeof the regression I used xtset ID, T_Event.
I also posted the link to my dataset. Hopefully you can help us solve this problem.

Kind regards,
Xander Meertens

[Carlo Lazzaro]

What does -xttest0-gives back?

[xander meertens]

This is the result of that test

[xander meertens]

Hi Carlo,

Does this xttest0 helps to clarify if my xtreg is the right test for my question?

Kind regards,
Xander Meertens

[Carlo Lazzaro]

Xander:
yes, partially at least.
You should compare -fe- vs -re- specification via -hausman-.