Hello,

I have an unbalanced panel dataset with approximately 4000 observations on the return on equity of mfids ranging from year 2003-2010. I am running linear random effects xtregs and read that the within group residuals need to be normally distributed for a RE model to return a useful interpretation. My _roe variable does not meet that requirement.

In order to fix this issue I have tried to add a constant with the size of the minimum value of _roe and then log the resulting observations. Using the xtsktest command my significance value for the "joint test for normality on e" decreases, but still stays within the 5% level.

Is there any remedy to correct for the normality assumption?

Code:
* Example generated by -dataex-. To install: ssc install dataex
clear
input int year long mfiid float _roe
2007 100000    .2913083
2008 100000   .17713334
2009 100000   .14123334
2004 100001   .04955833
2005 100001 -.008699998
2006 100001   .02328333
2007 100001   .21060835
2009 100001  .015933335
2010 100001  .017058332
2008 100004   .20683333
2006 100008   -.4828166
2007 100008   -.4197917
2008 100008  -2.9300666
2009 100008    9.721633
2005 100012       .3659
2006 100012   -.4431167
2007 100012   1.6969082
2008 100012   1.2119334
2009 100012    .9820334
2010 100012   .16185834
2009 100013  -.10906667
2010 100013  -.13484167
2005 100016      -.0101
2006 100016 .0035833344
2007 100016  .016408335
2008 100016   .05173333
2009 100016   .07153333
2010 100016   .08925833
2003 100017      .17895
2004 100017   .16935833
2006 100017   .09988333
2007 100020  .003608331
2008 100020  .010133334
2009 100020   .09823333
2010 100020  .016058333
2005 100021      -.0768
2006 100021  -.05961667
2007 100021 -.017191667
2008 100021  -.04696666
2009 100021 -.023466665
2010 100021 -.014741667
2006 100024    .9799833
2009 100024   .51533335
2010 100024  .014058333
2004 100026   17.870058
2005 100026       -5.09
2006 100026    9.523084
2007 100026  -2.4865916
2008 100026   .54033333
2009 100026   1.4377333
2010 100026    .4943583
2003 100027   1.0200499
2004 100027    .8740584
2005 100027       .7555
2006 100027   .16448334
2006 100029  -.16821668
2007 100029   .27910832
2008 100029   .07793334
2009 100029  .005633332
2005 100030      -.0131
2006 100030  .024183333
2007 100030   .02750833
2008 100030   .05113334
2005 100031        -.02
2006 100031  -.03771666
2007 100031 -.033691667
2009 100031   .14953333
2010 100031   .19615833
2004 100032   .06425834
2005 100032      -.0216
2008 100032   .17953333
2010 100032   .17735833
2005 100033    .9403999
2006 100033    .7986833
2007 100033   .07110833
2008 100033   .05233334
2009 100033   .03813333
2010 100033   .23085834
2003 100036     1.58285
2004 100036    16.50846
2005 100036       .0053
2006 100036    .6539834
2007 100036   .11130834
2008 100036 -.025066666
2009 100036 -.006966667
2010 100036   .03235833
2003 100039     -.15105
2004 100039  -.10604167
2005 100039       .2303
2006 100039 -.008116666
2005 100041       .6233
2006 100041    .9760834
2007 100041   .25010833
2008 100041   .36893335
2008 100042  -.22946666
2009 100042  -.52516663
2010 100042  -.02404167
2004 100043   -6.986542
2005 100043       .2743
2006 100043   1.2188834
end
Help is highly appreciated. Kind regards,
Rafael