Re: st: RE: Two level fixed effect with Newey-West standard errors

[Fernando Rios Avila <f.rios.a@gmail.com>]

Hi Mohamad,
I would also add that if you decide  transform your data by 2-level
demeaning, this is an iterative process (you have to demean your
variables more than once), unless your data is balanced respect to the
fixed effects.
HTH
Fernando

On Wed, Dec 4, 2013 at 9:47 AM, Schaffer, Mark E <M.E.Schaffer@hw.ac.uk> wrote:
> Mohamad,
>
>> -----Original Message-----
>> From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-
>> statalist@hsphsun2.harvard.edu] On Behalf Of Mohamad Mahmoud
>> Sent: 03 December 2013 15:44
>> To: statalist
>> Subject: st: Two level fixed effect with Newey-West standard errors
>>
>> Hi,
>> I need to estimate a two level fixed effects model with Newey-West
>> standard errors. I use -xtivreg2- and I know that it does the job, however it is
>> extremely slow. I am using a very large database (6 million observations, 30
>> covariates, 4000 company fixed effects, 5000 date fixed effects) and it takes
>> multiple hours for each regression.
>> is there a fast command to execute this?
>
> -xtivreg2- supports only 1-way fixed effects, so I am not sure how you are doing this.  Are you including dummies for the date FEs and letting -xtivreg2- handle the company FEs?
>
> In any case, you might be able to speed things up by partialling out the date and company FEs by hand (i.e., transform your data by 2-level demeaning), and then just use -ivreg2-.  Depending on your choice of covariance estimator, you might have to adjust the variance/SEs by hand afterwards for the loss of degrees of freedom from the FEs, but that's not too hard.
>
> HTH,
> Mark
>
>> Thanks,
>> Mohamad Mahmoud
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