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F test handout

F test handout

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ECON 761: F tests and t tests with Dummy Variables L. Magee November, 2007 ———————————————————– The main part of this handout contains output from a Stata program with commentary. The do and log files are given at the end. Loading, generating, and summarizing the data The data set Ftest B.raw contains 100 observations on the dependent variable y, and a “categorical” variable x. x equals 1, 2 or 3 depending on which of three groups the observation belongs to. . infile y x using "C:\Documents and Settings\courses\761 and 762\f06\handouts\Ftest_B" (100 observations read) . summarize y x Variable | Obs Mean Std. Dev. Min Max -------------+----------------------------------------------------y | 100 10.19334 5.452461 -3.00243 23.07246 x | 100 1.65 .6571287 1 3 The variable x should not be used directly in the regressions. That would force the “effect” of being in the x=2 group to be halfway between the x=1 and x=3 groups, even though these x numbers are just labels. We need to create group dummy variables, also known as indicator variables. One way to do this in Stata is with the xi command. (xi is especially convenient if there are many groups.) In this example, xi creates two dummy variables, Ix 2 and Ix 3. Ix 2, for example, equals one when the original x value equals 2, and Ix 2 equals 0 when x6=2. . xi i.x i.x _Ix_1-3 (naturally coded; _Ix_1 omitted) . g _Ix_1 = 1 - _Ix_2 - _Ix_3 The above xi command did not create a Ix ...
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