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And I agree with the sentiments in Patrick Gaule's post to the list just now, which applied here mean that you shouldn't worry about testing for heteroskedasticity, and should just use cluster-robust SEs. That said, there is an important caveat, which is that you need to have a decent number of clusters for this to work reasonably well. See Austin Nichols' various posts to Statalist on this. Cheers, Mark Prof. Mark Schaffer Director, CERT Department of Economics School of Management & Languages Heriot-Watt University Edinburgh EH14 4AS tel +44-131-451-3494 / fax +44-131-451-3296 http://ideas.repec.org/e/psc51.html > I was wondering whether those tests would be reliable, > assuming that Stata 10 does adjust standard errors correctly. > > Any thought? > > Many thanks. > > Alice. > > --- "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk> wrote: > > > Alice, > > > > > -----Original Message----- > > > From: owner-statalist@hsphsun2.harvard.edu > > > [mailto:owner-statalist@hsphsun2.harvard.edu] On > > Behalf Of aapdm > > > Sent: 16 July 2008 23:34 > > > To: statalist@hsphsun2.harvard.edu > > > Subject: Re: st: RE: Re: Weak instruments > > > > > > Hi > > > > > > My apologies if this email gets there twice but I > > think I > > > lost the one I wrote before. > > > > > > I am using xtreg, fe and would like to test for > heteroskedasticity > > > after the estimation. > > > > > > Can someone tell me how to do that? Also, if I add > > the robust > > > command after xtreg, I would expect not to be able > > to reject > > > the null of homoskedasticity (for instance when > > using reg, fe > > > and including the dummies) but this is not the > > case: if I use > > > xttest3, I can't reject the null whether I add > > robust or not > > > after the estimation. > > > > A few thoughts here... > > > > - You should put a new title in the subject field when > starting a new > > thread. It misleads readers of the list and messes up threading if > > you don't. > > > > - You probably don't want to use -robust- with -xtreg,fe-. > Stock and > > Watson 2007 (see their NBER paper - > > http://www.nber.org/papers/t0323) > > show that the standard robust var-cov matrix is inconsistent. In > > other words, the SEs are wrong. They recommend either a > modified vcv > > (which isn't implemented by -xtreg- the last I checked) or > using the > > cluster-robust vcv. The latter is easy to do and will get you SEs > > that are robust to clustering as well as heteroskedasticity. > > > > - The standard > > White/Koenker/Breusch-Pagan/Godfrey/Cook-Weisberg > > tests > > for heteroskedasticity (which is what you probably had in mind for > > testing) will probably also be inconsistent after fixed effects > > estimation, for the same reason that the robust vcv is > inconsistent. > > At their heart, they are contrasting the robust vcv with > the classical > > (assumed homoskedasticity) vcv. Under the null of no > > heteroskedasticity, there shouldn't be much difference. But if the > > robust vcv is inconsistent, it's easy to see that you could > reject the > > null even if you have homoskedasticity. > > > > Bottom line: the easiest thing to do is to switch to using > -cluster- > > after -xtreg,fe- (or after -xtivreg2,fe-, if you'll pardon the > > self-plug). > > > > Hope this helps. > > > > Cheers, > > Mark > > > > Prof. Mark Schaffer > > Director, CERT > > Department of Economics > > School of Management & Languages > > Heriot-Watt University > > Edinburgh EH14 4AS > > tel +44-131-451-3494 / fax +44-131-451-3296 > > http://ideas.repec.org/e/psc51.html > > > > > Can someone help me? > > > > > > Many thanks. Alice. > > > > > > > > > > > > __________________________________________________________ > > > Not happy with your email address?. > > > Get the one you really want - millions of new > > email addresses > > > available now at Yahoo! > > http://uk.docs.yahoo.com/ymail/new.html > > > > > > * > > > * For searches and help try: > > > * http://www.stata.com/help.cgi?search > > > * http://www.stata.com/support/statalist/faq > > > * http://www.ats.ucla.edu/stat/stata/ > > > > > > > > > -- > > Heriot-Watt University is a Scottish charity registered > under charity > > number SC000278. > > > > > > * > > * For searches and help try: > > * http://www.stata.com/help.cgi?search > > * http://www.stata.com/support/statalist/faq > > * http://www.ats.ucla.edu/stat/stata/ > > > > > > __________________________________________________________ > Not happy with your email address?. > Get the one you really want - millions of new email addresses > available now at Yahoo! http://uk.docs.yahoo.com/ymail/new.html > > * > * For searches and help try: > * http://www.stata.com/help.cgi?search > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ > -- Heriot-Watt University is a Scottish charity registered under charity number SC000278. * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

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