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Re: st: random effects, heteroskedasticity & autocorrelation


From   Cordula Stolberg <cs32@sussex.ac.uk>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: random effects, heteroskedasticity & autocorrelation
Date   Wed, 12 May 2004 13:54:38 +0100

Mark,

Thanks for your reply. I have looked at that, as it happened to me in another regression. This time though, the model doesn't seem to have degenerated into a pooled OLS model, which really puzzles me. I think I might have to look at the set-up again.

Cordula

--On 12 May 2004 13:09 +0100 Mark Schaffer <M.E.Schaffer@hw.ac.uk> wrote:


Cordula,

Date sent:      	Wed, 12 May 2004 12:01:04 +0100
From:           	Cordula Stolberg <cs32@sussex.ac.uk>
To:             	statalist@hsphsun2.harvard.edu
Subject:        	st: random effects, heteroskedasticity & autocorrelation
Send reply to:  	statalist@hsphsun2.harvard.edu

Dear all,

I have two questions with regard to a random effects model. How do I
test  for heteroskedasticity and autocorrelation in such a model? I know
I can  use xtgls if there is heteroskedasticity and / or
autocorrelation, but I  don't know how to detect it.

Moreover -and this might be a very silly question- if I have a random
effects model and the Hausmann test tells me that the random effects is
better than fixed effects, how come that the results improve when I
include  country dummies in the random effects regression (the countries
would have  been the fixed effects)?
With respect to your second question, I think you might find that by
including the country dummies, your random effects estimation has
degenerated into pooled OLS.  You can tell by checking whether the
sigma_u that is reported by xtreg is zero.

Hope this helps.

--Mark

Thanks for your help,
Cordula
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Prof. Mark E. Schaffer
Director
Centre for Economic Reform and Transformation
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS  UK
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