collinearity with i.Year

[Alhanouf Almubarak]

Greetings,

I am trying to run a regression on my panel data. I have 400 firms for 10 years, from 2012 to 2021. I did try the command reg and xtreg but after running a regression, I don't know why Stata omitted the last year, 2021, because of collinearity.

Does this omitting affect my results?

Thank you.

[Andrew Musau]

It depends what it is collinear with. If it's with an independent variable that you are interested in studying, then yes that's a problem. If it's with a control variable, then you can just ignore the collinearity. Install reghdfe from SSC and the collinear variable will drop out if you absorb the year indicators.

reghdfe TobinQ D_SCORE Cash Size ROA MTB LEV, absorb(Year SIC2) vce(cluster(SIC2))

[Alhanouf Almubarak]

Thank you, Andrew.