Stata The Stata listserver
[Date Prev][Date Next][Thread Prev][Thread Next][Date index][Thread index]

st: Question about finite-sample adjustment for cluster-robust estimation


From   "Mark Schaffer" <M.E.Schaffer@hw.ac.uk>
To   statalist@hsphsun2.harvard.edu
Subject   st: Question about finite-sample adjustment for cluster-robust estimation
Date   Mon, 07 Jun 2004 17:31:41 +0100

Hi everybody.  David Roodman and Kit Baum spotted a small bug in 
ivreg2 when the cluster-robust option is used - the F-stat differs 
from that reported by official Stata because the degrees of freedom 
adjustment is different.  (We'll post a bug fix shortly.)

But this led to a question of why official Stata makes the finite-
sample adjustment it does for cluster-robust estimation, and maybe 
there are some survey specialists out there who can explain it.

The manual (under Regress) states that if the option chosen is just
-robust-, the finite sample adjustment for the var-cov matrix is

N/(N-k)

where N is the number of observation and k is the number of 
regressors including the constant.

If the option chosen is -cluster-, then the adjustment is

(N-1)/(N-k) * M/(M-1)

where M is the number of clusters.

The intuition is clear enough - when the number of clusters is small, 
the standard errors can get big - but why M-1?  Why not, for example, 
M-k?  (The logic for this alternative is that the rank of the var-cov 
matrix is M-k when the cluster-robust option is chosen, and if M-k is 
small then the standard errors should be big.)  Does anybody know of 
any Monte Carlo evidence on this?  Inquiring minds want to know....

--Mark
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
44-131-451-3494 direct
44-131-451-3008 fax
44-131-451-3485 CERT administrator
http://www.som.hw.ac.uk/cert

*
*   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/



© Copyright 1996–2014 StataCorp LP   |   Terms of use   |   Privacy   |   Contact us   |   What's new   |   Site index