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From |
Gordon Hughes <G.A.Hughes@ed.ac.uk> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
st: Re: Cross sectional dependence panel data random effects |

Date |
Sat, 21 Jul 2012 11:13:17 +0100 |

Gordon Hughes g.a.hughes@ed.ac.uk

---------------------------------------------------------------------- Date: Fri, 20 Jul 2012 11:41:38 +0200 From: Rauf Berent <rsberent@gmail.com> Subject: st: Cross sectional dependence panel data random effects Hello, I would really appreciate some help regarding how to check for cross sectional dependence in a random effects model when you have a highly unbalanced panel. I have an unbalanced panel (Number of obs: 1560, Groups: 213, Observations per group max: 10, avg: 7.3) as my data consists of a lot of companies that have been de-listed, merged or newly listed during a 10 year period. I have done a Hausman test and concluded that I should use a random effects model. When checking for cross sectional dependence/contemporaneous correlation in a random effects model xttest2 does not seem to work so I have downloaded and used a user written program ssc install xtcsd The results I get are the following . xtcsd, pesaran abs Error: The panel is highly unbalanced. Not enough common observations across panel to perform Pesaran's test. insufficient observations . xtcsd, friedman no observations xtcsd, frees no observations I am not really sure how to proceed as I was under the impression that an unbalanced panel was not a problem for Pesaran. I also was under the impression that friedman and frees tackle unbalanced panels by only using observations available for all cross sectional units. Being new to Stata and econometrics I would really appreciate all the help I can get. Thanks in advance, Rauf

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