Hi Everyone,
I estimate a linear model with OLS. I have two independent variables, x1 and x2. When I run regress y x1, I find that x1 is significant. When I run regress y x1 x2, x1 loses statistical significance as I expect since I argue that x2 matters for the changes in y not x1. Althoug the correlation between x1 and x2 is -0.25, (so there is no multicollinearity problem), I was suggested to orthogonalize two variables to make sure that actually x2 significantly explains y, not x1. When I orthognalize x2 and x1 (orthog x2 x1, gen (newx2 newx1)), t values remain almost same. When I orthognalize x1 and x2 (orthog x1 x2, gen (newx1_alt newx2_alt)), the coefficient on x1 becomes significant again. Can anyone help me how interpret these results? Should I use orthog here and if so, which order I should rely on? I read the help file but couldn't understand which one fits into my case better.
Thanks in advance.
Best,
Ulas
Related Posts with Orthogonalizing Two Variables in a Linear Regression
P-value based significance asterisks in price elasticity table in QUAIDS (Poi, 2012) modelDear Stata-users, I'm composing a demand elasticity model based on Poi's (2012) command: quaids. F…
Fixed-effects individual slopes with unbalanced data (reghdfe)Dear Stata users, I have a question regarding fixed-effects individual-slopes models, also known as…
How to interpret the result of dummy1 "#" dummy2Dear all: My code is : Y = gender#father_farmer +X. I expect the result of 1 1 ;the question is why …
Stationarity (unit root) and DCCE estimator (xtdcce2)?Dear members, In the case of DCCE estimator (xtdcce2), I got two unclear things: 1. one of the in…
Drop - last observation in each rowHi Everyone, Is there a way (command/code) in Stata to drop the last "row-wise varlist" in each row…
Subscribe to:
Post Comments (Atom)
0 Response to Orthogonalizing Two Variables in a Linear Regression
Post a Comment