Re: st: Fixed Effects GLS

[May Ster <mayfrank@gmail.com>]

Dear all,

If i'm not wrong, the -xtgls- does only available for random effects.
I guess i do get what you mean Andrea that you want to get an estimate
of what you mentioned " the
(T-1)*(T-1) covariance matrix of the error component is not an
identity matrix (multiplicated for sigma) but it is estimated in a
first stage"

Then i guess... there might not be an option for FE-GLS as what you
might want to do in STATA?

Am i right here?

Maysa,

On Tue, Apr 12, 2011 at 1:27 PM, Andrea Morescalchi
<morescalchi@ec.unipi.it> wrote:
> Thank you vey much Mark. I will look into this interpretation of FE, which I
> didn't know.
>
> But, regardless of the definition, I still do not understand how to tell
> Stata to estimate what in the 10 Chapter of Wooldridge (2002) is called
> FEGLS. Basically, I would like to estimate in Stata a FE where the
> (T-1)*(T-1) covariance matrix of the error component is not an identity
> matrix (multiplicated for sigma) but it is estimated in a first stage.
>
> Thanks
> Andrea
>
> On Tue, 12 Apr 2011 11:28:47 +0100
>  "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk> wrote:
>>
>> Andrea,
>>
>>> -----Original Message-----
>>> From: owner-statalist@hsphsun2.harvard.edu
>>> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Andrea
>>> Morescalchi
>>> Sent: Tuesday, April 12, 2011 9:57 AM
>>> To: statalist@hsphsun2.harvard.edu
>>> Subject: Re: st: Fixed Effects GLS
>>>
>>> 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!
>>
>> It is indeed, and not just in Stata.  The FE estimator is, by
>> definition, a GLS estimator.
>>
>> I am sure this is discussed in Jeff Wooldridge's book somewhere (there's
>> a 2010 edition out, by the way), but I don't have it handy and can't
>> direct you to the right chapter/page.  Another place you might look is
>> Arellano's 2003 book, "Panel Data Econometrics".  In chapter 2 (I think)
>> he shows that the FE estimator is the GLS estimator obtained after
>> applying the first-differencing transformation.
>>
>> --Mark
>>
>>> 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(r)
>>> > > -----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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>>
>>
>> --
>> Heriot-Watt University is a Scottish charity
>> registered under charity number SC000278.
>>
>>
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