Fixed effect on my database


Thanks a lot for your answer.

I have a question about fixed effect

I want to do a multivariate regression and I want to incorporate fixed effects by year and by company here is my equation:

𝐢𝐴𝑅=𝛽 +𝛽𝑀𝐴𝑆𝐢+π›½π‘ƒπ‘‚π‘ŠπΈπ‘…+𝛽𝐼𝑁𝐷+𝛽𝐴𝑉𝑂𝐼𝐷+𝛽𝑇𝐸𝑅𝑀+π›½πΌπ‘π·π‘ˆπΏπΊ

  • π‘Œπ‘π‘œπ‘›π‘‘π‘Ÿπ‘œπ‘™(i,t) + Ξ±i + Ξ΄t + Ξ΅i,t

Ξ±i = fixed effect by firms
Ξ΄t = fixed effect by years
Ξ΅i,t = error
control = control variables

My question is the following: I know that there must be only unique peers in my database. But, unfortunately, I sometimes have the same two companies for two similar years (it is not a duplicate, it may be that the first one concerns the beginning of the year and the other one the middle of the year, but we are still in the same year). Can I still use the fixed effect?

Just another information.
I have 2752 unique firms in a sample of 7183 observations.

Is my approach the right one?

I must admit that I am a novice in this field.

Do you have any suggestions?

Thanks you in advance

This is a DSGE modeling forum, not an regression/applied economics one. You may want to try

In your multivariate regression model, you want to incorporate fixed effects for both companies (Ξ±i) and years (Ξ΄t) to account for potential individual and time-specific variations. However, you’ve mentioned that you have multiple observations for the same companies in similar years (e.g., beginning and middle of the same year). It’s important to handle this situation correctly.

When you have multiple observations for the same company within the same year, you need to decide whether you should include these observations in your fixed effects model. The choice depends on the nature of your lead data enrichment and your research question.