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From | Gordon Hughes <G.A.Hughes@ed.ac.uk> |
To | statalist@hsphsun2.harvard.edu |
Subject | st: Re: Cross sectional dependence panel data random effects |
Date | Sat, 21 Jul 2012 11:13:17 +0100 |
You may be better using a panel estimator which is robust to cross-section dependence such as the user written procedure -xtscc- which implements the Driscoll-Kraay estimator. However, you should bear in mind that allowing for cross sectional dependence in a large N, small T dataset will always be difficult unless you are willing to make some explicit assumptions about the nature of the dependence (i.e. the structure of the covariance matrix). An illustration is spatial panel models which assume a specific pattern of spatial (cross sectional) dependence.
Gordon Hughes g.a.hughes@ed.ac.uk
---------------------------------------------------------------------- Date: Fri, 20 Jul 2012 11:41:38 +0200 From: Rauf Berent <rsberent@gmail.com> Subject: st: Cross sectional dependence panel data random effects Hello, I would really appreciate some help regarding how to check for cross sectional dependence in a random effects model when you have a highly unbalanced panel. I have an unbalanced panel (Number of obs: 1560, Groups: 213, Observations per group max: 10, avg: 7.3) as my data consists of a lot of companies that have been de-listed, merged or newly listed during a 10 year period. I have done a Hausman test and concluded that I should use a random effects model. When checking for cross sectional dependence/contemporaneous correlation in a random effects model xttest2 does not seem to work so I have downloaded and used a user written program ssc install xtcsd The results I get are the following . xtcsd, pesaran abs Error: The panel is highly unbalanced. Not enough common observations across panel to perform Pesaran's test. insufficient observations . xtcsd, friedman no observations xtcsd, frees no observations I am not really sure how to proceed as I was under the impression that an unbalanced panel was not a problem for Pesaran. I also was under the impression that friedman and frees tackle unbalanced panels by only using observations available for all cross sectional units. Being new to Stata and econometrics I would really appreciate all the help I can get. Thanks in advance, Rauf
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