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st: RE: RE: xtivreg2, no constant in the outpuut?


From   "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: RE: xtivreg2, no constant in the outpuut?
Date   Sat, 1 Jul 2006 15:24:22 +0100

Pierre,

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> Pierre Azoulay
> Sent: 01 July 2006 01:11
> To: statalist@hsphsun2.harvard.edu
> Subject: st: RE: xtivreg2, no constant in the outpuut?
> 
> Thanks for your prompt response. Your point about the 
> validity of the HAC-VCV standard errors in short panels is 
> well taken. With fixed effects, could you use "robust 
> cluster(id)" where id is the level at which the fixed effects 
> are defined? I thought that for the standard errors to be 
> consistent, the number of clusters and the number of 
> observations could not increase at the same rate...

It's fine - there's no such problem with the cluster-robust estimator as
far as I know.  All you need is for the clusters to go off to infinity.

In fact, Steve Stillman just pointed me to a new paper by Stock and
Watson showing that with fixed effects, both the standard
heteroskedastic-robust and HAC-robust covariance estimators are
inconsistent for T fixed and >2, but the cluster-robust cov estimator
does not suffer from this problem.  One of their conclusions is that if
serial correlation is expected, cluster-robust is the best choice.

Paper details:

Heteroskedasticity-Robust Standard Errors for Fixed Effects Panel Data
Regression 
James H. Stock, Mark W. Watson
NBER Technical Working Paper #0323
http://papers.nber.org/papers/T0323 

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


> 
> Regards,
> 
> Pierre
> 
> 
> --------------------------------------------------------------
> --------------------
> Pierre Azoulay
> Associate Professor of Management
> Columbia University                           Phone: (212) 854-9684
> Graduate School of Business                Fax:   Don't send any
> 3022 Broadway, Uris Hall 704
> New York, NY 10023                        
> http://www.columbia.edu/~pa2009/
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