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Added-variable plots for panel-data estimation

Author

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  • John Luke Gallup

    (Portland State University)

Abstract

In this article, I extend the theory of added-variable plots to three panel-data estimation methods: fixed effects, between effects, and random effects. An added-variable plot is an effective way to show the correlation between an independent variable and a dependent variable conditional on other independent variables. In a multivariate context, a simple scatterplot showing x versus y is not adequate to show the relationship of x with y, because it ignores the impact of the other covariates. Added-variable plots are also useful for spotting influential outliers in the data that affect the estimated regression parameters. Stata can display added-variable plots with the command avplot, but it can be used only after regress. My new command, xtavplot, is a postestimation command that creates added-variable plots after xtreg estimates. Unlike avplot, xtavplot can display a confidence interval around the fitted regression line.

Suggested Citation

  • John Luke Gallup, 2020. "Added-variable plots for panel-data estimation," Stata Journal, StataCorp LP, vol. 20(1), pages 30-50, March.
    • Handle: RePEc:tsj:stataj:v:20:y:2020:i:1:p:30-50
    DOI: 10.1177/1536867X20909689
    Note: to access software from within Stata, net describe http://www.stata-journal.com/software/sj20-1/gr0082/
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    Cited by:

    1. Gaganis, Chrysovalantis & Hasan, Iftekhar & Pasiouras, Fotios, 2020. "National culture and housing credit," Journal of Empirical Finance, Elsevier, vol. 56(C), pages 19-41.
    2. Marisa Pessoa Gonçalves & Pedro M. Nogueira Reis & António Pedro Pinto, 2024. "Bank Market Power, Firm Performance, Financing Costs and Capital Structure," IJFS, MDPI, vol. 12(1), pages 1-21, January.

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