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Re: st: RE: RE: difference between robust and cluster option


From   Nils Braakmann <nilsbraakmann@googlemail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: RE: RE: difference between robust and cluster option
Date   Fri, 16 Jul 2010 13:07:51 +0200

As far as I know, using -robust- with a fixed effects estimator now
automatically uses -cluster(id)- since some update in version 10.1
(might also be 10.0). The reason (again as far as I know) ist that
Stock and Watson showed in an Econometrica-article in 2008 that the
"normal" robust SEs are inconsistent with a FE-estimator (see James H.
Stock and Mark Watson, 2008: “Heteroskedasticity-Robust Standard
Errors for Fixed Effects Panel Data Regression”, Econometrica 76(1):
155-174). So, my guess would be that your results are identical
because both of your approaches in fact use -cluster(id)- (and rightly
so).

Best,
Nils

On Fri, Jul 16, 2010 at 7:18 AM, Ma, Guang <guang.ma@utdallas.edu> wrote:
> The coefficients estimated should be the same, since they are unbiased under both "robust" and "cluster", but the t-values and standard errors should differ. You may still get the same t-values, though, depending on your data and cluster variables.
>
>
> Guang Ma
> Accounting Department
> The University of Texas at Dallas
> School of Management, SM41
> Richardson, TX 75080
>
>
>
>
>
> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Jing Zhou
> Sent: Friday, July 16, 2010 12:09 AM
> To: statalist@hsphsun2.harvard.edu
> Subject: st: RE: difference between robust and cluster option
>
> thank you for your advisement. I tried cluster and robust in FE model individually, but the results are exactly the same. if "robust" only control for heteroskedasiticity while "cluster" for heteroskedasticity and serial correlation, why there is no difference between the two regressions?
>
>>>> "Ma, Guang" <guang.ma@utdallas.edu> 16/07/2010 2:54 pm >>>
> Anyone is welcomed to correct me if I made any mistake.
>
> I think cluster can take good care of both heteroskedasticity and serial correlation, as long as you cluster in a panel way. "robust" is just heteroskedasticity consistent since it uses 1/(1-h)^2 as weights. Check this paper: Petersen, M. A. 2009. "Estimating standard errors in finance panel data sets: Comparing approaches." Review of Financial Studies 22 (1): 435-480.
>
>
> Guang Ma
> Accounting Department
> The University of Texas at Dallas
> School of Management, SM41
> Richardson, TX 75080
>
>
>
> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Jing Zhou
> Sent: Thursday, July 15, 2010 8:34 PM
> To: statalist@hsphsun2.harvard.edu
> Subject: st: difference between robust and cluster option
>
> To control for the heteroskedasticity and serial correlation in FE and RE models, do I need to add only "robust" or both "robust"and "cluster" option in the corresponding command? And after this remedy, is it unnecessary to worry about the two problems?
>
>
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