Cordula,
Date sent: Wed, 12 May 2004 12:01:04 +0100
From: Cordula Stolberg <[email protected]>
To: [email protected]
Subject: st: random effects, heteroskedasticity & autocorrelation
Send reply to: [email protected]
> Dear all,
>
> I have two questions with regard to a random effects model. How do I test
> for heteroskedasticity and autocorrelation in such a model? I know I can
> use xtgls if there is heteroskedasticity and / or autocorrelation, but I
> don't know how to detect it.
>
> Moreover -and this might be a very silly question- if I have a random
> effects model and the Hausmann test tells me that the random effects is
> better than fixed effects, how come that the results improve when I include
> country dummies in the random effects regression (the countries would have
> been the fixed effects)?
With respect to your second question, I think you might find that by
including the country dummies, your random effects estimation has
degenerated into pooled OLS. You can tell by checking whether the
sigma_u that is reported by xtreg is zero.
Hope this helps.
--Mark
>
> Thanks for your help,
> Cordula
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Prof. Mark E. Schaffer
Director
Centre for Economic Reform and Transformation
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS UK
44-131-451-3494 direct
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44-131-451-3485 CERT administrator
http://www.som.hw.ac.uk/cert
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