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Re: st: Fixed Effects GLS


From   "Andrea Morescalchi" <morescalchi@ec.unipi.it>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Fixed Effects GLS
Date   Tue, 12 Apr 2011 10:56:50 +0200

Dear Ada and Maysa,
I was trying too to estimate the FEGLS as presented in Wooldridge (2002), but with only one error component.

Anyway, I cannot understand properly the first line of Ada's response: "Fixed Effects model is a kind of GLS model. Use the basic FE commands and you will be fine." I red carefully the Chapter 10 in Wooldridge, but I cannot see among the - xtreg, FE - options available which is that for doing FEGLS. In particular, the options available for vce are: conventional, robust, cluster, bootstrap, or jackknife. FEGLS implies a particular structure for the (T-1)*(T-1) covariance matrix for the errors, i.e. the matrix is estimated after a standard FE in the first step where this matrix is an identity matrix multiplicated for the T-constant variance parameter. Among FE Stata options the most proper to do FEGLS would seem: "vce(conventional), the default, uses the conventionally derived variance estimator for generalized least squares regression". This line is a bit strange to me since it seems to imply that the standard FE Stata regression is actually a FEGLS! I computed the FE and the FEGLS separately in Matlab and it turns out that the "conventional" Stata FE is identical to that with error v-c matrix equal to an identity matrix (multiplicated for sigma_u). But which is the option which tells Stata to estimate the v-c matrix in the first step?

Thanks in advance
Andrea

On Tue, 12 Apr 2011 00:09:11 +0000
 "Ada Ma" <heu034@googlemail.com> wrote:
Fixed Effects model is a kind of GLS model. Use the basic FE commands and you will be fine. There are user written commands for two way FEs but I can't remember the commands' names, sorry! There are two of them and they r both featured in the Stata Journal, one of the authors for one command is Upward. HTH.


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-----Original Message-----
From: May Ster <mayfrank@gmail.com>
Sender: owner-statalist@hsphsun2.harvard.edu
Date: Mon, 11 Apr 2011 23:10:06 To: <statalist@hsphsun2.harvard.edu> Reply-To: statalist@hsphsun2.harvard.eduSubject: st: Fixed Effects GLS

Dear Statalist,

I tried reading Woolridge (2002), Chapter 10 after he mentioned choosing between Random effects model and Fixed effects model, he does
mentioned 'Fixed Effects GLS".

I'm not sure how does this apply to STATA command if i want to use
'Fixed Effects GLS".

If my model is a two-way fixed effects model, Basically, is the 'Fixed Effects GLS" can be written like this (i've checked for serial
correlation in error terms) ;

xi: xtgls var1 var2 var3 i.year , panel(hetero) corr(psar1)


Please help.

Thank you very much in advance

Maysa
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