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Re: st: significance level after ols, robust


From   Maarten buis <maartenbuis@yahoo.co.uk>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: significance level after ols, robust
Date   Tue, 1 May 2007 14:44:19 +0100 (BST)

--- Viktor Slavtchev <viktor.slavtchev@uni-jena.de> wrote:
> Im estimating a simple OLS with correction for intragroup
> correlation: reg y x1 x2, cluster(race).
> Now Stata reports estimated coefficient, SE, t-values and P>|t|. For
> example: 2.910862   1.303605     2.23   0.089
> t-value of 2.23 means significant at 5%, at least according to a
> standard normal distribution table.  Significance level reported by
> Stata is, however, 8.9%. Why?

Because you shouldn't compare a t-value with a standard normal
distribution, but with a t distribution. If the number of degrees of
freedom is large, the normal is a good distribution of the t, but this
is not the case if the number of degrees of freedom is small, and with
the cluster option the number of degrees of freedom is a function of
the number of clusters and not of the number of observations. If you
cluster over race than the number of degrees of freedom is likely to be
very small indeed and the normal distribution is no longer a good
approximation of the t-distribution. 

Hope this helps,
Maarten

 

-----------------------------------------
Maarten L. Buis
Department of Social Research Methodology
Vrije Universiteit Amsterdam
Boelelaan 1081
1081 HV Amsterdam
The Netherlands

visiting address:
Buitenveldertselaan 3 (Metropolitan), room Z434

+31 20 5986715

http://home.fsw.vu.nl/m.buis/
-----------------------------------------


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