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From |
"Majid Ghorbani" <mghorban@sfu.ca> |

To |
<statalist@hsphsun2.harvard.edu> |

Subject |
st: degree of freedom and FGLS |

Date |
Tue, 9 Oct 2007 16:18:14 -0700 |

Dear experts, I have two question; the first question has 3 scenarios and the second one a choice between FGLS and FE. Q1. I’m confused about calculating degree of freedom in panel data. The following three scenarios are most interesting to me: The first scenario is under normal circumstance when I am running regression (e.g. OLS). Let’s say I have trade of 20 countries with 5 states over 15 years period. Assuming that there are no missing data, I will have (20*5 cross-section and 15 time-series) 20*5*15 = 1500 observations. If I have 14 independent variables (iv), should I assume that I have 1500 - (14 +1) = 1485 df? Scenario 2: In similar situation, if I am running robustness of my regression using, for example, countries as my cluster, should I assume that I have 5*15=75 observations, and therefore, 75 - (14+1) = 60 d.f.? Scenario 3. I want to know the d.f. when I am trying to find out whether my data is heteroskedastic or not. In such test, according the help file, I have to do the following: xtgls dv iv1 iv2 iv3 …, panels(heteroskedastic) estimates store Hetero xtgls dv iv iv2 iv3 ... df = e(N_g) - 1 lrtest Hetero .,df(‘df’) Apparently I am supposed to tell STATA the exact number of d.f. to not allow the software automatically assume the “usual” number of d.f., which, as mentioned in the first scenario, I am unsure how many it is as well. According to the manual e(N_g) means number of groups or number of cross-sections, which, in my case, I am confused whether it is 20 or 20*5=100. However, e(N_g) - 1 = 20 - 1 = 19 does not make any sense (or it does)? When I was using the above commands, I accidentally forgot to type the d.f. amount in the brackets ('df'). STATA displayed an error message telling me that the d.f. is 8. This really confused me, because it made even less sense. Q2. If my data proved to be heteroskedastic and autocorrelated, should I run FGLS or fixed effect (as determined by Hausman test)? By FGLS, I mean using the command xtgls with "heteroskedastic" and "correlate" options and by fixed effect I mean using "xtreg" command with fe option. Thank you for your help. Majid ******************************* Majid Ghorbani PhD Candidate SFU Business Segal Graduate School of Business Simon Fraser University 500 Granville Street Vancouver, BC, Canada Tel: 604-732-4533 Mobile/Cell: 778-839-8840 mghorban@sfu.ca * * 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/

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