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RE: st: Heterokedasticity - help
Ingo, Le,
Two thoughts:
First, Stock and Watson have shown that the usual heteroskedastic-robust
SEs for the fixed effects estimator are not consistent, but the
cluster-robust ones are. See
http://www.nber.org/papers/T0323
Second, -xtivreg2- will run on Stata 8.2 and supports standard fixed
effects estimation with no endogenous regressors as well as -cluster-
and -robust-.
Cheers,
Mark
> -----Original Message-----
> From: [email protected]
> [mailto:[email protected]] On Behalf Of Tung Le
> Sent: 03 May 2007 19:41
> To: [email protected]
> Subject: Re: st: Heterokedasticity - help
>
> Hi Ingo, thanks for your help. I use Stata 8.2 Intercool and
> it does not allows for xtreg,, fe, robust as well as cluster
> option. For the xtscc, when I run it says: option prop() not
> allowed (error occurred while loading xtscc.ado) My dataset
> contains financial information (balance sheets and profit and
> loss accounts items) of around 730,000 observations of 79,000
> firms in 12 years. I run xttest3 and it suggests that there
> is hetero in the sample. Should I trust this tests?
> I also run xttest2 to test for the cross sectional dependence
> but it says: "firms contains all missing values" - nightmare!
> Le
>
>
> ----- Original Message ----
> From: Ingo Brooks <[email protected]>
> To: [email protected]
> Sent: Thursday, May 3, 2007 4:09:21 PM
> Subject: Re: st: Heterokedasticity - help
>
>
> Le,
>
> Which Stata version do you use? In Stata 9.2 you can estimate
> fixed effects models with heteroscedasticity consistent
> standard error estimates. Just type -xtreg ... , fe robust-.
> However, typically you should not estimate a fixed effects
> model with just heteroscedasticity consistent standard errors
> but rather a model with panel robust standard errors. In
> Stata 9.2 you can do this by typing -xtreg ... , fe
> cluster(ID)- where ID is assumed to be the panel identifier.
>
> However, your panel seems to be a microeconometric panel.
> Therefore, probably heteroscedasticity is not the main
> problem for your residuals. Rather the problem might be
> cross-sectional dependence between the subjects. Therefore, I
> would recommend you to estimate a fixed effects model with
> Driscoll-Kraay standard errors since these standard errors
> are heteroscedasticity consistent and robust to
> cross-sectional as well as temporal dependence. Thanks to Dan
> Hoechle's -xtscc- program it is simple to estimate
> fixed-effects regressions with Driscoll-Kraay standard
> errors. Just type -xtscc ...
> , fe-. To download the program type -net search xtscc-.
>
> I hope this helps.
>
> Best,
> Ingo
>
>
>
>
> On 5/3/07, Tung Le <[email protected]> wrote:
> > Dear Statalist, I am new to Stata and would like to ask for
> your help on the heterokedasticity issue:
> > 1. I run xttest3 and find that heterokedasticity exist in
> my data. However, the author of the test suggests that we
> should take the test with great care when the data has large
> N and small T. My data has 730,000 obs over 12 year period
> (unbalanced). Are they considered small T? and if they are,
> is xttest3 suitable? it seems that "robvar" test does not
> allowed for panel.
> > 2. Assume that my data exist the heterokedasticity problem,
> what type of xt model is suitable to correct this? xtreg...,
> fe seems not to allow for robust standard error. xtgls? or xtpcse?
> > 3. I tried xtgls but they said matsize is too small. They
> suggests that matsize should be at least equal to the number
> of groups of firms in my data so I think they use fixed
> effects model. However, why does not it require large matsize
> when I run xtreg..., fe? what is the difference here?
> > Many thanks and hope to receive your advice soon, Le
> >
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