AW: st: RE: RE: difference between robust and cluster option

["Jing Zhou" <jing.zhou@rmit.edu.au>]

according to Petersen (2009) (estimating standard errors in finance
panel data sets: comparing approaches, review of financial studies,
2009.), the standard errors clustered by firm and time can be a useful
robustness check. My dataset is a sample of 560 firms over 9 years
(unbalanced). Could you please advise me how I can cluster both firm and
time in my analysis by using stata. cos when typing "xtreg, fe cluster
(year)", the result shows "panels are not nested within clusters". 

Many thanks!

Jing

>>> "Martin Weiss" <martin.weiss1@gmx.de> 16/07/2010 9:18 pm >>>

<> 

Maybe 



update 25feb2008

...


    20.  xtreg, fe now uses vce(cluster id) when vce(robust) is
specified,
in light of the new results in Stock and Watson,
         "Heteroskedasticity-robust standard errors for fixed-effects
panel-data regression," Econometrica 76 (2008): 155-174.




HTH
Martin

-----Ursprüngliche Nachricht-----
Von: owner-statalist@hsphsun2.harvard.edu 
[mailto:owner-statalist@hsphsun2.harvard.edu] Im Auftrag von Nils
Braakmann
Gesendet: Freitag, 16. Juli 2010 13:08
An: statalist@hsphsun2.harvard.edu 
Betreff: Re: st: RE: RE: difference between robust and cluster option

As far as I know, using -robust- with a fixed effects estimator now
automatically uses -cluster(id)- since some update in version 10.1
(might also be 10.0). The reason (again as far as I know) ist that
Stock and Watson showed in an Econometrica-article in 2008 that the
"normal" robust SEs are inconsistent with a FE-estimator (see James H.
Stock and Mark Watson, 2008: “Heteroskedasticity-Robust Standard
Errors for Fixed Effects Panel Data Regression”, Econometrica 76(1):
155-174). So, my guess would be that your results are identical
because both of your approaches in fact use -cluster(id)- (and rightly
so).

Best,
Nils

On Fri, Jul 16, 2010 at 7:18 AM, Ma, Guang <guang.ma@utdallas.edu>
wrote:
> The coefficients estimated should be the same, since they are
unbiased
under both "robust" and "cluster", but the t-values and standard
errors
should differ. You may still get the same t-values, though, depending
on
your data and cluster variables.
>
>
> Guang Ma
> Accounting Department
> The University of Texas at Dallas
> School of Management, SM41
> Richardson, TX 75080
>
>
>
>
>
> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
[mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Jing Zhou
> Sent: Friday, July 16, 2010 12:09 AM
> To: statalist@hsphsun2.harvard.edu 
> Subject: st: RE: difference between robust and cluster option
>
> thank you for your advisement. I tried cluster and robust in FE
model
individually, but the results are exactly the same. if "robust" only
control
for heteroskedasiticity while "cluster" for heteroskedasticity and
serial
correlation, why there is no difference between the two regressions?
>
>>>> "Ma, Guang" <guang.ma@utdallas.edu> 16/07/2010 2:54 pm >>>
> Anyone is welcomed to correct me if I made any mistake.
>
> I think cluster can take good care of both heteroskedasticity and
serial
correlation, as long as you cluster in a panel way. "robust" is just
heteroskedasticity consistent since it uses 1/(1-h)^2 as weights. Check
this
paper: Petersen, M. A. 2009. "Estimating standard errors in finance
panel
data sets: Comparing approaches." Review of Financial Studies 22 (1):
435-480.
>
>
> Guang Ma
> Accounting Department
> The University of Texas at Dallas
> School of Management, SM41
> Richardson, TX 75080
>
>
>
> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
[mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Jing Zhou
> Sent: Thursday, July 15, 2010 8:34 PM
> To: statalist@hsphsun2.harvard.edu 
> Subject: st: difference between robust and cluster option
>
> To control for the heteroskedasticity and serial correlation in FE
and RE
models, do I need to add only "robust" or both "robust"and "cluster"
option
in the corresponding command? And after this remedy, is it unnecessary
to
worry about the two problems?

>
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