If the influence of the market is the same for all investors, it will
simply contribute to the constant term in your cross-sectional
regression. It won't create correlations among the residuals, and
consequently you don't need to do anything about it.
David Greenberg, Sociology Department, New York University
----- Original Message -----
From: Alok Kumar <[email protected]>
Date: Friday, December 22, 2006 1:50 pm
Subject: st: How to control for non-independence?
> Hi Guys,
>
> I am trying to estimate a cross-sectional regression where the
> observationsare not independent. I have the performance of a large
> number of investors
> as the dependent variable and various investor characteristics
> (Age, Income,
> Gender, etc.) are independent variables. Because the performance
> of ALL
> investors would be influenced by the market, the performance
> measures are
> correlated.
>
> How can I estimate the cross-sectional regression, where I can
> control for
> this potential non-independence? I don't think the "robust" option
> takesinto account this cross-sectional dependence. The "cluster"
> option might
> take care of this but I don't know how the performance might be
> clustered.Is there any way of taking care of this problem in Stata?
>
> Thanks very much for your help.
> Regards, Alok
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>
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