I want to do a multivariate regression and I want to incorporate fixed effects by year and by company here is my equation:
𝑌𝑐𝑜𝑛𝑡𝑟𝑜𝑙(i,t) + αi + δt + εi,t
αi = fixed effect by firms
δt = fixed effect by years
εi,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.
In your multivariate regression model, you want to incorporate fixed effects for both companies (αi) and years (δt) 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.