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st: RE: 'xtoverid"
"Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
st: RE: 'xtoverid"
Tue, 24 Apr 2012 19:49:24 +0100
> -----Original Message-----
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> [mailto:firstname.lastname@example.org] On Behalf Of D.
> Sent: 24 April 2012 18:27
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> Subject: st: 'xtoverid"
> Hi everyone,
> This question is adressed to Prof. Mark Schaffer (author of
> xtoverid)but maybe others can help.
> Xtoverid can be used to decide between FE Vs. RE when
> heteroskedasticity and/or cluster errors are present.
> My question is: Are the extra orthogonality conditions, which
> xtoverid is testing, imposed by the FE estimator or by
> heteroskedasticity and/or clustering?
The extra orthogonality conditions being tested are those imposed by the
RE estimator. These are the conditions that the Xs are orthogonal to
the time-invariant error u_j.
Also, allowing for heteroskedaticity or clustering doesn't "impose"
anything, let alone impose orthogonality conditions. On the contrary -
it means the test statistic is robust to (has the right distribution
under the null even in the presence of) heteroskedasticity and
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