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Re: st: some unexplained issues with coefficient comparisons


From   "Narasimhan Sowmyanarayanan" <narasimhan.sowmyanarayanan@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: some unexplained issues with coefficient comparisons
Date   Wed, 28 Jun 2006 21:47:18 -0400

Hello Mark:

Thanks a lot for your email. I created two different datasets of
demeaned variables. and ran OLS. I extracted the variance covariance
matrix using estat and now know how to modify it.  This may be
trivial, but I could not make myself to store the matrix and make the
DOF adjustment to the VCE. (If I am correct my areg had  F(  6,  1181)
and my regress had  F(  6,  1357) =   19.23.  So the DOF adjustment is
(1357/1181) ? becasue the standard error adjustment is the square root
of this number.

I thought that the eret2 command I think needs a matrix name to enable
me to repost the data but I am not very clear on how I should repost
the variance covariance matrix.

Some help would be highly appreciated since I am kind of stuck in this issue.

Thanks



On 6/27/06, Schaffer, Mark E <M.E.Schaffer@hw.ac.uk> wrote:
Narasimhan,

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of
> Jeff Pitblado, StataCorp LP
> Sent: 27 June 2006 16:40
> To: statalist@hsphsun2.harvard.edu
> Subject: Re: st: some unexplained issues with coefficient comparisons
>
> Narasimhan Sowmyanarayanan
> <narasimhan.sowmyanarayanan@gmail.com> is comparing results
> of -suest- after -areg- with an equivalent -regress- model
> with indicator variables:
>
> > I am facing one situation that I have not been able to intuit. I ran

> > two different fixed effect panel regressions for different groups
and
> > compared the coefficients across the two groups. The test yeilded
that
> > there was no significant difference when I used 'suest' to compare
the
> > coefficients.
> >
> > Then I tried to run the same models in OLS using explicit dummy
> > variables. My estimates are very close (some difference possibly
came
> > because of some additional dummy variables that I tried to put in
that
> > I could not use in my fixed effects model). The coefficients that I
> > compared were very close. But when I ran the same comparison using
OLS
> > I found that the coefficients were significantly different.
> >
> > To summarize the same coefficients when I used suest after areg gave

> > me insignificant difference as compared to the usage of suest after
a
> > simple regression with dummy variables which indicated the
difference
> > was significant.
>
> We've recently discovered that -suest- yields incorrect
> results when used after -areg-.  This is not something that
> can easily be fixed given that the meat of the sandwich
> estimator of variance (Robust/Huber/White VCE) cannot be
> properly computed due to the fact that the coefficient
> estimates for the absorbed categories in -areg- are not
> present in -e(b)- (and the corresponding indicators are not
> present in the dataset).
>
> In the next ado-file update, -suest- will report an error
> message when used with -areg- (something it should have done
> from the start).
>
> Note that -suest- was not listed as a supported
> postestimation command after
> -areg- in [R] areg postestimation.
>
> --Jeff
> jpitblado@stata.com

Jeff's comment offers a clue on how you might be able to proceed.  A
fixed effects model can be estimated using OLS on transformed data.  The
transformation is "demeaning", which is conveniently done by Ben Jann's
-center- package.  You might be able to do the following:

(1) Create demeaned variables for each of your fixed effect models.  The
variables may differ from model to model because the samples on which
they are estimated may differ, hence the possible need to create
different sets of demeaned variables.

(2) Estimate the fixed effects models using OLS on the demeaned
variables.

(3) Do the degrees-of-freedom adjustment for the N fixed effects on the
var-cov matrix saved in e(V) by hand and repost using Ben's -eret2-
routine (I *think* this will work).  The dof adjustment is standard and
is discussed in various textbooks as well as in the Stata manual's
entries for xtreg etc.

(4) Use -suest- to compare the coefficients.

Rather laborious, but I think it should work.

Hope this helps.

Cheers,
Mark

Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3296
email: m.e.schaffer@hw.ac.uk
web: http://www.sml.hw.ac.uk/ecomes


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