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

re: st: ivreg2 and panel group heteroscedasticity


From   Mark Schaffer <M.E.Schaffer@hw.ac.uk>
To   statalist@hsphsun2.harvard.edu, Jeffry Jacob <jajacob@mail.smu.edu>
Subject   re: st: ivreg2 and panel group heteroscedasticity
Date   Sat, 21 Aug 2004 21:38:58 +0100 (BST)

Jeffry,

> -----Original Message-----
> From: Jeffry Jacob [mailto:jajacob@mail.smu.edu] 
> Sent: Saturday, August 21, 2004 2:36 PM
> To: 'Mark Schaffer'
> Subject: RE: st: ivreg2 and panel group heteroscedasticity
> 
> Hi Mark,
> Thanks for your response. It is very helpful indeed.
> Since I have a fixed effect model, I need to mean difference the
> data
> (using dummies results in #of parameters > # groups/clusters).
> My thought of _cluster_ with _bw(1)_ was motivated by the fact
> that
> since _abar_ test indicates no autocorrelation, cluster with robust
> and
> bandwidth(1) might give me sigma_i's for each group where _bw(1)_
> will
> mean no autocorrelation. But now it is clear that _cluster_ by
> itself
> will do all this.

That's right, with a small caveat.  -cluster- gives you SEs that are valid 
under a very wide set of circumstances (arbitrary within-group 
correlation), but you might be paying a price for this robustness.  You 
could be better off if you can be more specific about the type of 
autocorrelation you face, and then use the appropriate technique (GLS or 
kernel-based HAC).  The asymptotics to make the latter approach (-bw-) 
work need t to go to infinity, though, and if you have a short panel then 
that's probably not going to work.

> I have one more related question though. If there is evidence of 
> cross
> panel correlation, E(sigma_i,sigma_j)~=0, and there is
> endogeneity,
> xtpcse can not be used. Will ivreg2 with robust give the right
> standard
> errors in this case?

I don't think so, if I understand you correctly.  -ivreg2- with -robust- 
is just like -ivreg- with -robust- (if you are instrumenting) or -regress- 
with -robust- (if you aren't).  To get SEs that are right with any of 
these estimators, I think you would need to use -cluster-.  (Somebody out 
there correct me if I'm wrong about this!)

Cheers,
Mark

> Thanks again,
> Jeffry
> 
> 
> 
> -----Original Message-----
> From: Mark Schaffer [mailto:M.E.Schaffer@hw.ac.uk] 
> Sent: Saturday, August 21, 2004 12:35 PM
> To: statalist@hsphsun2.harvard.edu; Jeffry Jacob
> Cc: Mark Schaffer
> Subject: Re: st: ivreg2 and panel group heteroscedasticity
> 
> Jeffry,
> 
> Quoting Jeffry Jacob <jajacob@mail.smu.edu>:
> 
> > Hi all,
> > The latest version of ivreg2 supports panel data by requiring
> the
> > data
> > to be tsset. But how does it interpret the _iis_ (individual
> > identifier)
> > variable?
> 
> It uses it to identify the group/cluster.  No fixed effects or
> anything 
> like that.
> 
> > Suppose there is no autocorrelation but group-wise
> > heteroscedasticity. Does the _robust_ option give the right
> > standard
> > errors or they only correct for arbitrary heteroscedasticity?
> 
> The latter.
> 
> > Will
> > cluster option with _bw(1)_ do the trick?
> 
> Sort of.  The -cluster- and -bw- options can't be used together. 
> They
> do 
> different things.
> 
> -cluster- allows for arbitrary within-group correlation (including
> 
> autocorrelation of any form).  It also allows for arbitrary 
> heteroskedasticity, including groupwise heteroskedasticity.
> 
> -bw- allows for autocorrelation with some time structure, i.e.,
> you
> expect 
> the autocorrelation to die out over time.  The argument to bandwith
> is 
> related to how quickly you expect it to die out.  You can combine
> this 
> with -robust- to get HAC (heteroskedastic and
> autocorrelation-consistent) 
> standard errors.
> 
> > Moreover, to use _cluster_
> > , I
> > have to mean difference my data ( to remove individual
> > unobservables).
> 
> Strictly speaking, the answer to your question is that you can use
> -cluster- without mean-differencing or otherwise transforming your
> data.
> 
> But it sounds like you still might want to do this anyway - it
> depends
> on 
> the estimator you want to implement.
> 
> > As noted in Wooldridge (2002), Chapter 10, do I correct for the
> > degrees
> > of freedom in the standard errors?
> 
> Only if you do the mean-differencing or some other transformation.
> 
> Hope this helps.
> 
> Cheers,
> Mark
> 
> > Any response will be much appreciated.
> > Thanks,
> > Jeffry
> > 
> > *
> > *   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/
> > 
> 
> 
> 
> Prof. Mark Schaffer
> Director, CERT
> Department of Economics
> School of Management & Languages
> Heriot-Watt University, Edinburgh EH14 4AS
> tel +44-131-451-3494 / fax +44-131-451-3008
> email: m.e.schaffer@hw.ac.uk
> web: http://www.sml.hw.ac.uk/ecomes
> ________________________________________________________________
> 
> DISCLAIMER:
> 
> This e-mail and any files transmitted with it are confidential
> and intended solely for the use of the individual or entity to
> whom it is addressed.  If you are not the intended recipient
> you are prohibited from using any of the information contained
> in this e-mail.  In such a case, please destroy all copies in
> your possession and notify the sender by reply e-mail.  Heriot
> Watt University does not accept liability or responsibility
> for changes made to this e-mail after it was sent, or for
> viruses transmitted through this e-mail.  Opinions, comments,
> conclusions and other information in this e-mail that do not
> relate to the official business of Heriot Watt University are
> not endorsed by it.
> ________________________________________________________________
> 
> *
> *   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/
> 



Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3008
email: m.e.schaffer@hw.ac.uk
web: http://www.sml.hw.ac.uk/ecomes
________________________________________________________________

DISCLAIMER:

This e-mail and any files transmitted with it are confidential
and intended solely for the use of the individual or entity to
whom it is addressed.  If you are not the intended recipient
you are prohibited from using any of the information contained
in this e-mail.  In such a case, please destroy all copies in
your possession and notify the sender by reply e-mail.  Heriot
Watt University does not accept liability or responsibility
for changes made to this e-mail after it was sent, or for
viruses transmitted through this e-mail.  Opinions, comments,
conclusions and other information in this e-mail that do not
relate to the official business of Heriot Watt University are
not endorsed by it.
________________________________________________________________
*
*   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