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st: re: overlapping observations in panel

From   Kit Baum <>
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   |
An Introduction to Stata Programming |
   An Introduction to Modern Econometrics Using Stata  |

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