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st: re: overlapping observations in panel


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: re: overlapping observations in panel
Date   Wed, 14 Oct 2009 14:54:01 -0400

<>
In my last posting, I created a dependent variable as

g inv12 = invest + L.invest + L2.invest + L3.invest

and used the estimation command

xtreg inv12 cashflow kstock12, vce(cluster company) fe

It is important to note that the use of overlapping data creates moving average errors (in this case, of order MA(3)) even if the original errors are i.i.d. The cluster-robust estimator handles arbitrary departures from independence within each cluster (company), which should take care of that.

Kit Baum   |   Boston College Economics & DIW Berlin   |   http://ideas.repec.org/e/pba1.html
An Introduction to Stata Programming | http://www.stata-press.com/books/isp.html
   An Introduction to Modern Econometrics Using Stata  |   http://www.stata-press.com/books/imeus.html

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