Re: st: Testing for panel-level heteroskedasticity with xtgls

[Clive Nicholas <clivelists@googlemail.com>]

rado645-bg@yahoo.de wrote:

> I am a bit confused from the result I got for a LR test. I want to test about
> heteroscedasticity across panels as suggested by the Stata team in their FAQ
> section.
>
> In particular, it is suggested to calculate iterated GLS with only
> heteroskedasticity first and save the likelihood. Then to fit the model but
> without the heteroscedasticity assumption (though it is not specified if this
> second model shall be iterated or it shall be left without this option).
>
> Below is the result I got. i would like also to ask if  my p-value of the test
> now indicates that I have heteroscedasticity or actually not? I am confused
> because they provide no explanation. Moreover, is it a bad sign to get no output
> of estimates for ll(null)?
>
>
> . lrtest hetero . , df(`df') stats
>
> Likelihood-ratio test                                  LR chi2(16) =    493.43
> (Assumption: . nested in hetero)                       Prob > chi2 =    0.0000
>
> -----------------------------------------------------------------------------
>   Model |    Obs    ll(null)   ll(model)     df          AIC         BIC
> -------------+---------------------------------------------------------------
>           . |    367           .   -29.55142     29     117.1028    230.3583
>   hetero |    367           .    217.1648     46    -342.3296   -162.6829
> -----------------------------------------------------------------------------
>               Note:  N=Obs used in calculating BIC; see [R] BIC note

Going simply by the significance of your LR chi-square statistic in
your test, this would appear to support the hypothesis that your IGLS
model does have panel-level heteroscedascity.

Since this is case, maybe you should switch to fitting an OLS model
with panel-corrected standard errors (-xtpcse-) to deal with this
issue?

-- 
Clive Nicholas

[Please DO NOT mail me personally here, but at
<clivenicholas@hotmail.com>. Please respond to contributions I make in
a list thread here. Thanks!]

"My colleagues in the social sciences talk a great deal about
methodology. I prefer to call it style." -- Freeman J. Dyson.

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