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From | Christopher Baum <kit.baum@bc.edu> |
To | <statalist@hsphsun2.harvard.edu> |
Subject | re: st: Re: heteroskedasticity test in panel data |
Date | Thu, 29 Jul 2010 07:27:59 -0400 |
<> David said I am estimating a random effects model (xtreg re) after having performed a hausman test (which indicated that I can use both the fixed effects as the random effects models) I am now testing my model for the assumptions of autocorrelations and heteroscedasticity. I have already excluded problems with autocorrelation. Additionally I have run a lrtest, following the guidelines in the FAQ and your anwers to the questions of Jing. The outcome of this test is reported below. My question is, how should I interpret this result. I assume that it means that my model suffers from heteroscedasticity? How then should I proceed further? Furthermore I wonder (as I am a new to econometrics) whether there are any additional assumptions that I need to test using the xtreg re model(aside from the normal assumptions for multivariate analysis)? ... . lrtest hetero . , df(18) Likelihood-ratio test LR chi2(18) = 63.33 (Assumption: . nested in hetero) Prob > chi2 = 0.0000 In this case (unlike Jing's) the test procedure from the FAQ works fine and delivers a sensible result. The null hypothesis for this test is homoskedasticity, which you clearly are rejecting. You should at the very least use the vce(robust) option. As it appears that you only have 18 panels, it may not be wise to use cluster-robust standard errors (by panel), but you could try vce(cluster panelid) as well to see what happens. Clustering by panel would allow for arbitrary dependence between errors within-panel. Kit Kit Baum | Boston College Economics & DIW Berlin | http://ideas.repec.org/e/pba1.html An Introduction to Stata Programming | http://www.stata-press.com/books/isp.html An Introduction to Modern Econometrics Using Stata | http://www.stata-press.com/books/imeus.html * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/