I run a regression in Stata with a Compustat dataset that contains `fyear` and `gvkey`. I want to add firm and year fixed effects, so I type the following command:<\/p>\n
`regress DV IV i.fyear i.gvkey`<\/p>\n
But Stata returns the error r(103), which suggests “too many variables specified”. It turns out that the culprit is `i.gvkey`.<\/p>\n
I find two work-arounds:<\/p>\n
(1) Use both `xtset` and `xtreg`:
\n`xtset gvkey`
\n`xtreg DV IV i.fyear, fe`<\/p>\n
(2) Use `areg`:
\n`areg DV IV i.fyear, absorb(gvkey)`<\/p>\n
`xtreg` is the Stata command for fixed-, between-, and random-effects linear models, and `areg` is the Stata command for linear regression with a large dummy-variable set.<\/p>\n
In my example, I find that both commands returns exactly same results.<\/p>\n","protected":false},"excerpt":{"rendered":"
I run a regression in Stata with a Compustat dataset that contains `fyear` and `gvkey`. I want to add firm and year fixed effects, so I type the following command: `regress DV IV i.fyear i.gvkey` But Stata returns the error … Continue reading