Re: st: panel data: xtrege, re vs. xtreg, fe vs. regress...cluster

[Philipp Rehm <philipp.rehm@gmx.de>]

Hi Mike,

I usually find it helpful if people offer the results from three 
different estimators: a RE estimator (using, say MLE or GLS), a between 
estimator, and a within (i.e. FE) estimator. The RE is just a weighted 
average of the within and between estimators. This allows the reader 
(and author) to see:
- whether the effect holds across firms (between estimator, which - 
essentially - is just using the mean values over years for each firm)
- whether the effect holds across time within firms (FE estimator)
- or both (RE estimator, or my interpretation thereof)

OLS (with sandwich estimator) just doesn't allow you to figure out these 
details.

HTH,
Philipp

P.S.
You may find the following book useful, which I can highly recommend:
Sophia Rabe-Hesketh and Anders Skrondal (2005): Multilevel and 
Longitudinal Modeling Using Stata 
(http://www.stata-press.com/books/mlmus.html).


Michael Pfarrer wrote:

> Hi Everyone,
>
> I know this topic has been debated for years on the listserv with many 
> helpful responses, but I thought I'd ask again to help me clarify things.
>
> I have a dataset of 291 firms over 15 years (N=4365). What, in essence, 
> is the "best" model to run for this analysis? I understand the 
> difference between fe and re and the use of the Hausman test, which, for 
> me, is n.s. But is there really an inherent difference between xtreg, re 
> and regress, cluster(id)? The OLS regress, cluster(id) normally gives me 
> "better" results, but I certainly want to understand if it is "correct". 
> I also understand that xtreg, re can decompose into OLS. So, if you had 
> these data across this panel with a continuous DV and continous and 
> binary IVs, what would you run? The DV is the Cumulative Abnormal Return 
> from a 3-day event window (-1, +1)and the IVs are firm financial 
> characteristics--ROA, volume, reputation dummy, etc.
>
> Many thanks,
>
> Mike
> Michael D. Pfarrer
> Department of Management and Organization
> Robert H. Smith School of Business
> University of Maryland
> College Park, MD 20742
> Phone: 301.653.0458
*
*   For searches and help try:
*   http://www.stata.com/support/faqs/res/findit.html
*   http://www.stata.com/support/statalist/faq
*   http://www.ats.ucla.edu/stat/stata/