I run a regression in Stata with a Compustat dataset that contains `fyear`

and `gvkey`

. I want to add firm and year fixed effects, so I type the following command:

`regress DV IV i.fyear i.gvkey`

But Stata returns the error r(103), which suggests “too many variables specified”. It turns out that the culprit is `i.gvkey`

.

I find two work-arounds:

(1) Use both `xtset`

and `xtreg`

:

`xtset gvkey`

`xtreg DV IV i.fyear, fe`

(2) Use `areg`

:

`areg DV IV i.fyear, absorb(gvkey)`

`xtreg`

is the Stata command for fixed-, between-, and random-effects linear models, and `areg`

is the Stata command for linear regression with a large dummy-variable set.

In my example, I find that both commands returns exactly same results.