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st: Replacing rho in corr(psar1)


From   Caroline Gunning-Trant <caroline@primal.ucdavis.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: Replacing rho in corr(psar1)
Date   Wed, 16 Jun 2004 18:04:12 -0700 (PDT)

Hello,

I have a panel dataset with 32 panels and 5 time periods.

I am running a Feasible GLS model where I correct for heteroscedasticity
and autocorrelation:

xtgls lnm lnduty, panel(het) corr(ar1).

Because I have only 32 panels, I am inclined to use
a common AR(1) coefficient for all panels in order to preserve degrees of
freedom.  However, I am also interested in results that allow for
different autocorrelation coefficients across panels using the option
"corr(psar1)".

When looking at the estimates of rho with the corr(psar1) option, I
observe that the absolute value of
several estimates are actually greater than 1.  According to
Kmenta
(1986, p.619) this is not a surprising result when T is small.  He
suggests an alternative and consistant estimate of rho(i) whose values are
confined to the interval from -1 to +1 for any sample size.
I have calculated using the residuals from an earlier estimation
that did not correct for autocorrelation.  What I would now like to do is
add a constraint in my do file that uses my calculated values of
rho_hat(i) rather than those in the program when the option corr(psar1) is specified.

I have looked at the FAQs on the stata.com website and have had a
fruitless search in the archives.  There is one FAQ that approaches my
problem (imposing a single value of rho in a 2-stage Heckman) but I wasn't
able to modify it succesfully for my purposes.  I have a feeling I have to
know the formula that is used when the 'psar1' option is engaged but I
don't know where to get that.

Would anyone know if a question like this has been posed before and where I might go to retrieve
it? OR would anyone be able to tell me what to do?

Thanks very much,
Caroline
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