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From |
"Thomas Jacobs" <thomasjacobs@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: re: Troubleshooting 'not sorted' and 'not regularly spaced' errors |

Date |
Mon, 13 Oct 2008 13:44:03 -0500 |

Mike, Thanks once again as that was very helpful. I missed the robust small command in the help file for ivreg2. As all my work is with trading data I always create a trading day date index similar to a business day counter but including holidays as in your number 4. The only gaps (or missing information) I have relate to missing values of the primary index I am regressing on as opposed to my firm specific information. Thus there are no gaps in the date index as I have defined it. Tom On Mon, Oct 13, 2008 at 1:19 PM, Michael Hanson <mshanson@mac.com> wrote: > Tom: > > Kit is, of course, correct that one can use -ivreg2- (from SSC; runs in > Stata 9) or -ivregress- (Stata 10 only) to mimic the -newey- and -newey2- > estimators, as all allow you to get Newey-West style heteroskedasticity and > autocorrelation consistent (HAC) standard errors. There are a few > additional points worth noting in order to make sure these various Stata > commands are delivering the HAC estimator that you have in mind. And when > you have time series with "gaps" and use lagged regressors, you may need to > pay close attention to whether you -tsset- or -xtset- to a Stata date > variable (with gaps) or a linear time trend (without gaps). > > 1. If m is the number of lags you would specify in -newey- or -newey2-, then > use m for the -ivregress, vce(hac nw m)- command, but n=m+1 for the -ivreg2, > bw(n)- command. As you point out, it takes some effort or experimentation > to extract this information from the -ivreg2- help file. > > 2. To match the HAC SE estimates of -newey- or -newey2-, you will need to > add the options -robust small- to an -ivreg2- estimation and the option > -small- to an -ivregress- estimation. > > 3. If you -tsset- (or -xtset-) your data to a Stata date variable with gaps, > you may not get the same HAC SE estimates from -newey2, force- as from > -ivreg2- or -ivregress- when lagged regressors are included. You can modify > my earlier example program to demonstrate that fact (left as an exercise). > This problem may or may not occur in your dataset. > > 4. If you instead -tsset- (or -xtset-) to a sequential linear time trend > (-gen t = _n-), then you will get the same results for all three commands -- > but you will have, in effect, told Stata that there are no gaps in your > data. Indeed, you likely will have included a larger set of observations in > your regressions, so both the coefficient estimates and the SE estimates are > likely to differ from those in (3). > > Which of (3) or (4) above is preferable depends on how you think the "gaps" > should be handled. Stata constructs lags by strictly using the prior > observation at the frequency specified. For example, if you have business > daily data (as in the example program in my prior message) and -tsset- to a > daily Stata date variable, Stata will not construct any lags for a Monday, > as the prior daily observation (Sunday) is missing in that financial data > set. However, you may well want Stata to treat Friday as the prior > observation -- which will require you to pay close attention to the > construction of your data and then to -tsset- to a time trend. (Other > statistical packages that specialize in time series estimation, such as RATS > and (IIRC) EViews, have an explicit "business daily" frequency as this > problem arises regularly in applications with financial data. One still has > to think about how to handle holidays in that case.) If instead you have > data with regular gaps -- such as every two or every five years of annual > data -- you can use the -delta- option of -tsset- or -xtset- to have Stata > treat the prior two- or five-year observation as the lagged value. > > HTH, > Mike > > On Oct 13, 2008, at 12:27 PM, Thomas Jacobs wrote: > >> Kit, >> >> Thanks for introducing me to ivregress and ivreg2 for use in newey >> west estimation. I was unfamiliar with both commands. I confirmed >> they run just as you indicated with both the examples Michael Hanson >> provided as well as the questions from my original post. No problems >> with either time series commands or gaps. >> >> Is the translation between newey west lags and bartlett kernel >> bandwidth simply bandwidth = lags +1 as it appears? I was unsure from >> the ivreg2 help file. Thanks again. >> >> Tom >> >> On Sat, Oct 11, 2008 at 3:07 PM, Kit Baum <baum@bc.edu> wrote: >>> >>> < > >>> Re Michael Hanson's comments on David Roodman's -newey2-: David has on >>> more >>> than one occasion suggested that those wanting to calculate Newey-West >>> standard errors in an OLS regression should just use -ivreg2- of Baum, >>> Schaffer, Stillman. Despite its name it is happy to estimate OLS models >>> without any instruments, and it can estimate Newey-West standard errors >>> as >>> well as a variety of other HAC models. E.g. >>> >>> ivreg2 irx t, robust bw(9) >>> >>> Notice that it reports the presence of gaps but does not choke on them. >>> -ivreg2- requires Stata 9.2. >>> >>> In fact, contradictory to its syntax diagram, -ivregress- can do this as >>> well. The -ivregress- syntax states that the (varlist2 = varlist_iv) >>> component is mandatory, but the program does not enforce this: >>> >>> ivregress 2sls irx t, vce(hac bartlett 8) >>> >>> works, making no mention of gaps. -ivregress- requires Stata 10. >>> >>> 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 > > * > * 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/ > -- Thomas Jacobs * * 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/

**References**:**st: re: Troubleshooting 'not sorted' and 'not regularly spaced' errors***From:*Kit Baum <baum@bc.edu>

**Re: st: re: Troubleshooting 'not sorted' and 'not regularly spaced' errors***From:*"Thomas Jacobs" <thomasjacobs@gmail.com>

**Re: st: re: Troubleshooting 'not sorted' and 'not regularly spaced' errors***From:*Michael Hanson <mshanson@mac.com>

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