Interpreting coefficient of a panel ols regression with time and year fixed effect

[Andreas Hetle]

Hi,

I have a problem related to understanding a coefficient of a regression I have made.

Some of the variables in my dataset looks like this: "SKDchange" is the variable of interest as dependent variable, while I struggle to interpret the diff1Equity variable. The regression in on changes-changes form where both the explanatory and dependent variable measures the change from t-1 to t.

My regression code looks like this:
reg SKDchange diff1Bokførtavkastning diff1Verdijustertavkastning diff1Diff diff1NPVrentegar diff1Duration diff1Innskutt_EK diff1Annen_EK diff1Tilleggsavsetning diff1Kursreguleringsfond diff1Premiefond diff1Equity diff1IG diff1HY diff1HF diff1PE diff1Eiendom i.Year i.id, vce(cluster id Year)

* Example generated by -dataex-. For more info, type help dataex
clear
input float(diff1Equity diff1IG diff1Duration SKDchange)
           .            .             .     .
   .04754161   -.09403566     -.1599999   -.3
  -.02064644  -.018740425     .54999995  -.14
  .010813517   -.01095776          -.25  -.02
 -.026318334  -.002717563           .71  -.29
   .05093006  -.005377363          -.43  -.12
-.0011152852  -.013379592     .13000004   .07
 -.024114784    .04315393    .029999923   .27
   .02377115   -.04732417           .48   .16
 -.030893333    .03741644     .22999993   .12
   .02928274    .02414991          1.65    .3
  .001455957  .0004799768     .26000005   .22
  .004779475    .00558187    -.27000016  -.07
           .            .             .     .
  -.00512642   .004711266    -.10917584  -.07
 -.063273735    .04655176     .26596162  -.18
   .02563643   -.02877299         -.355  -.03
  -.04105696    .15782078     -.2039706   .19
  .009601564  -.010468778     .10676478  -.41
   .02057601    .02437022     .11147057   .14
   .02281441  -.012794206   -.011764593   .04
   -.1235865    .11275683          1.35   .08
  -.04838456 -.0012550277         -2.28  -.17
-.0041883523    .01323345          3.05   .43
  .012058506  -.015719667    -2.0700002   .09
 -.005533226 -.0021816033          1.45   .03
           .            .             .     .
   .06241516   -.05142799    -.19732134  -.04
-.0014952082  -.001770217      .9085715  -.91
   .04270349   -.06381753     -.7399999   .52
   .09990668   -.11121875     .32000005   -.2
  -.02076794   -.02086097      .6300001   .24
   .02764053    -.1214763         -1.75   .61
  -.04209387   -.03557081     .03099999  -.29
   .02711773   -.08156485      .2990001  -.05
  -.04882512    .06585504     .28000006  -.12
  -.04681846    .05470577      .2000001   .05
   .11536504   -.07811742     .20000005   .09
   .06964771   .013372925           -.8  -.15
           .            .             .     .
   -.0887506   .031709056      .8700001  -.13
  -.08438469    -.4525758     .05999994  -.26
   .02664301  -.007119911            -1  -.05
 .0045617344    .02329633             0   .06
-.0021377348    .04008004         -1.43   .26
  -.01407777    .03055194    -.16999993  -.04
  .010314748   -.02585671         -1.76   .16
   .02583596   .031915076 -5.960464e-10   .07
  -.01983064  -.014577777          2.63  -.23
-.0041912617     .1929425     .13833335   .01
  -.08911186    -.2353105     .06904765   .51
  .032503515    .04405855       .286619   .01
           .            .             .     .
   .02059753    .00604589    -1.4834615   .33
 -.012380703   -.06797267      .5134616  -.41
  .016461588   .018263668          -2.8   .19
 -.016667238   .001590435            .1    .3
 -.024444895   .024264194           .75   .23
  .007214402  -.013604298          1.56  -.51
    .1661422   -.08117536     -.8400001   .09
   .03991343   -.04297239     .10000005  -.21
    .0945853    -.1083463  2.384186e-08  -.11
   .09561862   -.10853375    -.09999998   -.2
   -.3036081    .27654004            .4   .83
    .0191042   -.04063289      .4999999  -.18
           .            .             .     .
  .028694145   -.07184994     -.4087499  1.04
  -.11852485   .065436386     -.2100001   .83
   .06047443   -.08638582           -.3   .08
  -.00934424   .008003984    -.19999997  -.12
   .05878297    .05886357     .19999996  -.66
  -.03458966    .04444094            .2  -.02
  -.01792603    -.0598651     -.6999999   .85
  .009644688    .03987899           -.3  -.93
  .004996592  -.006057756 -2.384186e-08  -.17
 .0002828524   -.10505882            .4   .61
  -.01864195  -.002772984          -.14  1.31
  .031855654    .08679447          1.01 -1.65
           .            .             .     .
  .012399666    .06262513    -.19732134    .1
  -.22266704   -.05568459    -.07587294   .19
    .1560319    .11884157    .022385584  -.44
   .03940175   .016805476    -.28460786  -.34
  .017667945   -.04138368     -.3033333   .12
 -.007013578  .0078530125    -.52000004   .56
  -.06908407     -.072072      .6799999   .34
   .06103085    .04783031      .2599999   .17
  -.02623497    .07248117     -.1000001   .19
   .04369584   -.03614791     .57000005   -.1
   .02110185   -.04804264     1.0100001  -.05
    .0099649 -.0017389223     .11999989  -.15
           .            .             .     .
   .08086738  -.014327994    -.10917584  -.58
  -.12395176   -.05033401     .26596162  -.05
  -.15088338    .13968238         -.355   .19
   .04139739    .20281895     -.2039706  -.15
  .035840575   -.16239823     .10676478  -.17
   .11057469  .0003425852     .11147057   -.2
 -.005472437   -.02754408   -.011764593   .17
   .03027286    .05957837         -2.28   .13
end

What I get out of the regression is shown in the attachment. What I don't totally is how to interpret the coefficients for diff1duration which is measured in years, and diff1Equity against the dependent variable SKDchange. (I do not understand diff1IG etc. either but the interpretation would be the same as for diff1Equity). Any help is greatly appreciated.

[Carlo Lazzaro]

Andreas:
I'd say that one unit change in diff1Equity reduces the regressand of 4.57 units other things being equal.

[Andreas Hetle]

Hi Carlo,
Thank you for replying so quickly. In terms of unit interpretation would you interpret this as 1% increase or a 1 percentage point increase? What confuses me is if the diff1Equity should be considered a fraction variable (since it measures the difference between the proportion of a portfolio allocated to equities) (the change can only be from 0-100 percentage points), while the and what implications this have for my interepretation

Have a nice day!

Best regards Andreas

[Andreas Hetle]

Hi Carlo,
Thank you for replying so quickly. In terms of unit interpretation would you interpret this as 1% increase or a 1 percentage point increase?

Have a nice day!

Best regards Andreas

[Carlo Lazzaro]

Andreas:
I'm keen to 1 percentage point increase.