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Any other thought appreciated!

With best wishes,

Alice.




--- Kit Baum <baum@bc.edu> wrote:

> < >
> Mark said
> 
> -whitetst- (or, pardon the self-plug, -ivhettest-)
> after -regress- with
> fixed effects inserts as dummies by hand probably
> won't be appropriate,
> for the reason I gave in my previous email.
> 
>  >From what I know about -xttest3-, it won't be
> affected by the
> Stock-Watson results, but this is just a quick
> guess.  Kit Baum is the
> author of -xttest3- and he or someone else would be
> better placed than
> me to say (as I gather he just did!).
> 
> 
> Actually, per my prior posting, -whitetst- is one of
> those tests that  
> only makes use of residuals from a regression, and
> is thus immune to  
> problems with the variance-covariance matrix. All
> that is needed are  
> consistent point estimates. The White general test
> is a special case  
> of the Breusch and Pagan test (q.v. -bpagan-, or
> more generally - 
> ivhettest-).
> 
> Note, though, that the alternative hypotheses of the
> White / Breusch- 
> Pagan and -xttest3- tests differ considerably. The
> latter evaluates  
> whether the squared residuals are correlated with a
> set of dummies  
> for the individual panels. The White test considers
> whether there is  
> correlation between squared residuals and all
> regressors, squared  
> regressors and cross-products of regressors. The B-P
> test allows you  
> to choose the variables in that list (which may thus
> include  
> variables not in the original regression).
> 
> I wholeheartedly agree that the cluster-robust VCE
> is the most  
> sensible thing to apply in the -xtreg, fe- context.
> Of course, the vce 
> (bootstrap) could be used to evaluate whether the
> cluster-robust SEs  
> look reasonable.
> 
> Kit
> 
> Kit Baum, Boston College Economics and DIW Berlin
> http://ideas.repec.org/e/pba1.html
> An Introduction to Modern Econometrics Using Stata:
> http://www.stata-press.com/books/imeus.html
> 
> 
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