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From |
"J.J." <accjiang@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
st: HUGE Wald test statistics of testing multiple coefficients in a fixed effect model with cluster option |

Date |
Mon, 10 Mar 2008 15:27:18 -0400 |

Dear Statalisters, My question is related to Daniel Simon's question in this unanswered post: http://www.stata.com/statalist/archive/2006-03/msg00024.html. I estimate a linear fixed effect model (about 3000 observations and 500 groups) with around 300 dummy variables. With the cluster option, the F-statistics of testing the joint significance of these dummy variables becomes HUGE (100,000+) even many of these coefficients are dropped in the test. When I just use the robust instead of the cluster option, the Wald test produces reasonable F-statistics. My main purpose is to test the joint significance of these dummy variables in the fixed effect model, should I drop the cluster option? Given the suggestions by Johannes Schmieder, Mark Schaffer and Austin Nichols in this post (http://www.mata.dk/statalist/archive/2006-09/msg00782.html), I felt it is absolutely necessary to use the cluster option with xtreg, fe. However, Mark Schaffer and Austin Nichols (http://repec.org/usug2007/crse.pdf) allude to the danger of testing multiple coefficients after the cluster option. In their simulation, the rejection rate increases to 1 as the number of coefficients increases. I guess their results indicate that the Wald test in my situation (cluster option and so many variables in the model) is not valid. What should I do? Any suggestions will be highly appreciated. One solution is to test if I need the cluster option using the not yet available xtcltest (Mark and Austion, when is this program available?). If I do need the cluster option, the next option is to get rid of some of the dummy variables. J. J. * * 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/

**Follow-Ups**:**Re: st: HUGE Wald test statistics of testing multiple coefficients in a fixed effect model with cluster option***From:*"Austin Nichols" <austinnichols@gmail.com>

**st: RE: HUGE Wald test statistics of testing multiple coefficients in a fixed effect model with cluster option***From:*"Verkuilen, Jay" <JVerkuilen@gc.cuny.edu>

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