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From |
Richard Williams <Richard.A.Williams.5@nd.edu> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: Re: Problems with -hetgrot- |

Date |
Mon, 15 Mar 2004 00:16:38 -0500 |

At 07:38 PM 3/14/2004 -0500, Richard Williams wrote:

What I don't understand is why he is using the 15708.84 from the least squares estimates, rather than using a ML estimate of sigma. This would seem to be inconsistent with what he says on the middle of p. 597.Bill Greene kindly emailed me on this (he cc'd the list but I am not sure it got through). Anyway, he basically pointed out that the least squares estimate of sigma is also the ML estimate of sigma; his reported test statistic of 120.915 is therefore right, the 122.89 that other programs produced was wrong. I think those of us who came up with alternative programs were trying to fix the programming mistakes in -hetgrot- without realizing that there was a fundamental error in the underlying approach that was being used, at least with regards to cross-sectional time series.

Here is an alternative approach that finally seems to get the test statistic right. It involves a chi-square contrast of the restricted homoskedastic model and an unrestricted heteroscedastic model. I am again using Greene's data in table 15.1, 4th edition.

. quietly tsset firm year

. * No heteroscedasticity

. quietly xtgls i f c

. estimates store nohet

. * heteroskedasticity

. quietly xtgls i f c, p(h) igls

. estimates store hetero

. lrtest hetero nohet, force df(4)

likelihood-ratio test LR chi2(4) = 120.91

(Assumption: nohet nested in hetero) Prob > chi2 = 0.0000

Presumably this could all be automated and made to work with something besides Greene's data, and with routines besides xtgls.

*

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**Follow-Ups**:**Re: st: Re: Problems with -hetgrot-***From:*Richard Williams <Richard.A.Williams.5@nd.edu>

**References**:**Re: st: Re: Problems with -hetgrot-***From:*"Scott Merryman" <smerryman@kc.rr.com>

**st: updates to -egenmore- on SSC***From:*"Nick Cox" <n.j.cox@durham.ac.uk>

**st: Problems with -hetgrot-***From:*"Clive Nicholas" <Clive.Nicholas@newcastle.ac.uk>

**Re: st: Re: Problems with -hetgrot-***From:*Richard Williams <Richard.A.Williams.5@nd.edu>

**Re: st: Re: Problems with -hetgrot-***From:*Richard Williams <Richard.A.Williams.5@nd.edu>

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