Re: st: Fixed Effects GLS

["Andrea Morescalchi" <morescalchi@ec.unipi.it>]

Dear Ada and Maysa,
I was trying too to estimate the FEGLS as presented in 
Wooldridge (2002), but with only one error component.

Anyway, I cannot understand properly the first line of 
Ada's response: "Fixed Effects model is a kind of GLS 
model. Use the basic FE commands and you will be fine."
I red carefully the Chapter 10 in Wooldridge, but I cannot 
see among the - xtreg, FE - options available which is 
that for doing FEGLS. In particular, the options available 
for vce are: conventional, robust, cluster, bootstrap, or 
jackknife.
FEGLS implies a particular structure for the (T-1)*(T-1) 
covariance matrix for the errors, i.e. the matrix is 
estimated after a standard FE in the first step where this 
matrix is an identity matrix multiplicated for the 
T-constant variance parameter.
Among FE Stata options the most proper to do FEGLS would 
seem: "vce(conventional), the default, uses the 
conventionally derived variance estimator for generalized 
least squares regression". This line is a bit strange to 
me since it seems to imply that the standard FE Stata 
regression is actually a FEGLS! I computed the FE and the 
FEGLS separately in Matlab and it turns out that the 
"conventional" Stata FE is identical to that with error 
v-c matrix equal to an identity matrix (multiplicated for 
sigma_u). But which is the option which tells Stata to 
estimate the v-c matrix in the first step?

Thanks in advance
Andrea

On Tue, 12 Apr 2011 00:09:11 +0000
 "Ada Ma" <heu034@googlemail.com> wrote:
> Fixed Effects model is a kind of GLS model. Use the basic 
> FE commands and you will be fine. 
>
> There are user written commands for two way FEs but I 
> can't remember the commands' names, sorry! There are two 
> of them and they r both featured in the Stata Journal, 
> one of the authors for one command is Upward. HTH.
>
>
> Sent using BlackBerry®
>
> -----Original Message-----
> From: May Ster <mayfrank@gmail.com>
> Sender: owner-statalist@hsphsun2.harvard.edu
> Date: Mon, 11 Apr 2011 23:10:06 
> To: <statalist@hsphsun2.harvard.edu>
> Reply-To: statalist@hsphsun2.harvard.eduSubject: st: 
> Fixed Effects GLS
>
> Dear Statalist,
>
> I tried reading Woolridge (2002), Chapter 10 after he 
> mentioned
> choosing between Random effects model and Fixed effects 
> model, he does
> mentioned 'Fixed Effects GLS".
>
> I'm not sure how does this apply to STATA command if i 
> want to use
> 'Fixed Effects GLS".
>
> If my model is a two-way fixed effects model, Basically, 
> is the 'Fixed
> Effects GLS" can be written like this (i've checked for 
> serial
> correlation in error terms) ;
>
> xi: xtgls var1 var2 var3 i.year , panel(hetero) 
> corr(psar1)
>
>
> Please help.
>
> Thank you very much in advance
>
> Maysa
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