Re: st: RE: Why not always specify robust standard errors?

[Richard Williams <Richard.A.Williams.5@ND.edu>]

At 11:42 AM 2/13/2007, German Rodriguez wrote:
> David Freedman has a provocative answer in "On the so-called 'Huber sandwich
> estimator' and 'robust standard errors' in the American Statistican, Vol 60
> (4) 299-302, November 2006. Here is the abstract:
>
> The "Huber Sandwich Estimator" can be used to estimate the variance of the
> MLE when the underlying model is incorrect. If the model is nearly correct,
> so are the usual standard errors, and robustification is unlikely to help
> much. On the other hand, if the model is seriously in error, the sandwich
> may help on the variance side, but the parameters being estimated by the MLE
> are likely to be meaningless - except perhaps as descriptive statistics.
>
> I think he has a valid point asking why the fuzz about standard errors when
> the estimates may be wrong.
Thanks German.  I've read the paper (it is only 4 pages long but to 
me reads more like it is 40!).  If I understand it correctly, he says 
people who use robust standard errors make this big deal about 
getting the standard errors right, but they pay little attention to 
the fact that their parameter estimates are biased, sometimes seriously so.

But, as you note, he also says "If the model is nearly correct, so 
are the usual standard errors, and robustification is unlikely to 
help much." And, he also seems to make a distinction between using 
robust standard errors when your model is mis-specified, and using 
them when the model is correctly specified but heteroskedasticity is 
present (at least that is how I interpret part 6 of his paper.)

So, I think his cautions and concerns are pretty valid; robust 
standard errors are not a panacea for a model that is "seriously in 
error" .  But, it still seems to leave open the question of whether 
always using robust would be a good idea if your model is "nearly 
correct" or hetero is an issue.


-------------------------------------------
Richard Williams, Notre Dame Dept of Sociology
OFFICE: (574)631-6668, (574)631-6463
FAX:    (574)288-4373
HOME:   (574)289-5227
EMAIL:  Richard.A.Williams.5@ND.Edu
WWW (personal):    http://www.nd.edu/~rwilliam
WWW (department):    http://www.nd.edu/~soc 
*
*   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/