Dear Statalisters,

I have a very short question and would be thankful if you could give a quick thought.

I am a financial economist and currently study the performance of financial investors. For this purpose, I want to fit a mixed model of the following sort:

Code:
mixed investment_performance covariates i.investor_id || investor_id_investmet_year:
investor_id_investmet_year is an interaction between the investor and the investment year (each investor makes several investments a year). I am not so familiar with mixed models but believe to understand the basic assumptions.
In essence, I want to know whether it may cause any problem if the random effect (investor_id_investmet_year) is nested in one of the fixed effects (investor_id) of the model?
I don’t want to use a model with nested random effects (i.e. … || investor_id: || investor_id_investmet_year as the investor-specific effects are correlated with the other covariates, thereby violating the exogeneity assumption.

Happy to hear your thoughts on this.

Best regards
Peter