[Date Prev][Date Next][Thread Prev][Thread Next][Date index][Thread index]

From |
anirban basu <abasu@midway.uchicago.edu> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: Cross-Sectional Time Series |

Date |
Tue, 25 Jun 2002 11:52:40 -0500 (CDT) |

Hi John, With reg command and cluster option, one basically imposes an exchangeable correlation structure on the data. i.e assume corr (y(i), y(j)) = rho, where i ne j and i,j are any two observation from the same cluster. Rho is constant for every pair of observation within a cluster. So, one can visuaize it in terms of a random effects model where : Y(k) = Xb + U(k) + e, where k represents clusters and U(k) is a cluster-specific random effect that is common to all observation in that cluster. However, -reg- does not give estimates of this random effect. It just estimates -betas- assuming this structure. However, this estimation is correct only if U(k) are uncorrelated with Xs. i.e. the unobserved characteristics of a cluster over time is uncorrelated with the X over time. If not then fixed effects is useful. With fixed effects, one evades the correlation problem by taking differences. i.e for any cluster k: Y(ik) - Y(1k) = [X(ik) - X(1k)]b + [e(ik) - e(1k)] Note that by taking the difference, the unobserved U(k) is eliminated. However, fixed effects assume the U(k) is fixed over time for any cluster k. i.e. the unobserved characteristics of a cluster is not changing over time. Also, since we are taking a difference, fixed effects model cannot estimate the betas for baseline covariates since they cancel out in the difference. Hope this helps, Anirban ______________________________________ ANIRBAN BASU Doctoral Student Harris School of Public Policy Studies University of Chicago (312) 563 0907 (H) ________________________________________________________________ On Tue, 25 Jun 2002, John Neumann wrote: > Hello all, > > Since I frequently see panel data questions flying around the > list, I'm thinking that some of you can provide me with a > very succinct answer to the following question, and in so > doing clarify conceptually for me the data-related issue: > > I have data on investment products, by year. Not all > products have data in each year. The dependent > variable is scaled in such a way as to make time series > variation in its levels of no concern. Here's the question: > > What is the difference between using the reg command, > with the robust and cluster option, vs. the xtreg command > fixed effects model? The cluster variable using reg would > naturally be the i( ) parameter for xtreg ... > > Thanks! > > John Neumann > Boston University > > * > * For searches and help try: > * http://www.stata.com/support/faqs/res/findit.html > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ > * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**Re: st: Cross-Sectional Time Series***From:*Mark Schaffer <M.E.Schaffer@hw.ac.uk>

**References**:**st: Cross-Sectional Time Series***From:*John Neumann <neumannj@bu.edu>

- Prev by Date:
**st: Cross-Sectional Time Series** - Next by Date:
**Re: st: Cross-Sectional Time Series** - Previous by thread:
**st: Cross-Sectional Time Series** - Next by thread:
**Re: st: Cross-Sectional Time Series** - Index(es):

© Copyright 1996–2017 StataCorp LLC | Terms of use | Privacy | Contact us | What's new | Site index |