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From |
"David M. Drukker" <ddrukker@stata.com> |

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

Subject |
RE: st: Stata 11 Random Effects--Std. Errors |

Date |
Tue, 25 Aug 2009 10:45:20 -0500 (CDT) |

This post continues the thread about robust standard errors for the generalized least-squares estimator implemented in -xtreg ,re-. Eric de Souza <eric.desouza@coleurope.eu> asked whether there will be separate -vce()- options on -xtreg, re- to produce consistent estimators of the variance-covariance of the estimator (VCE) when the errors are heteroskedastic and when the errors are serially correlated. The answer is yes, there will be separate options for these cases. We will add a new -vce()- option for -xtreg ,re- that will produce the observation-level robust estimator that is consistent in the presence of some types of heteroskedasticity with -xtreg, re-. This observation-level robust estimator was produced by -vce(robust)- in Stata 10.1. In the Stata 11 -xtreg ,re-, we changed the meaning of the -vce(robust)- to be a synonym for -vce(cluster panelvar)-. We made this change because researchers increasingly expect this definition of robust. As Cameron and Trivedi (2005, section 21.2.3) and Wooldridge (2002, section 10.4.2) make clear, this individual-level robust estimator of the VCE is the natural "robust" estimator when sampling vectors of observations from individuals in the population. This VCE estimator is robust at the individual-level instead of at the observation level. This individual-level robust estimator of the VCE is more attractive in most real-world cases than the observation-level robust estimator because sampling is performed at the individual level. This individual-level robust estimator is consistent in the presence of heteroskedasticity and autocorrelation. Summing up, when specified with -xtreg re-, -vce(robust)- will continue to be a synonym for -vce(cluster panelvar)-. We will add a new, as yet unnamed, -vce()- option that will produce the observation-level robust VCE estimator that is robust to some types of heteroskedasticity. David --ddruker@stata.com References ---------- Cameron, A. C. and P. K. Trivedi. 2005. Microeconometrics: Methods and Applications. New York: Cambridge University Press. Wooldridge, J. W. 2002. Econometric Analysis of Cross Section and Panel Data. Cambridge, MA: MIT Press. * * 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/

**Follow-Ups**:**Re: st: Stata 11 Random Effects--Std. Errors***From:*Austin Nichols <austinnichols@gmail.com>

**References**:**RE: st: Stata 11 Random Effects--Std. Errors***From:*DE SOUZA Eric <eric.desouza@coleurope.eu>

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