Bookmark and Share

Notice: On March 31, it was announced that Statalist is moving from an email list to a forum. The old list will shut down on April 23, and its replacement, statalist.org is already up and running.


[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

st: Petersen (2009) vs Thompson (2011) - Estimating standard errors in panel data sets


From   "Julia Ke" <julia.ke@gmx.net>
To   statalist@hsphsun2.harvard.edu
Subject   st: Petersen (2009) vs Thompson (2011) - Estimating standard errors in panel data sets
Date   Tue, 04 Dec 2012 18:45:44 +0100

Dear Statalist, 

I am running a panel regression. It is a rather small sample with multiple firms and a few years. 

I was reading into which method to use, which came down to the following: If one dimension has far more units than the other, clustering on one dimension and using dummies on the other seems to be used (especially in smaller panels). 

My question concerns which unit to cluster and which one to use dummies on. The below two authors seem to state the opposite which is confusing me a bit... 

Petersen (2009): "Since most panel data sets have more firms than years, the most common approach is to include dummy variables each year (to absorb the time effect) and then cluster by firm."
"When there are only a few clusters in one dimension, clustering by the more frequent cluster yields results that are almost identical to clustering by both firm and time."

Thompson (2011): If there are far more firms than time periods, clustering by time eliminates most of the bias unless within-firm correlations are much larger than within-time period correlations.

Many thanks in advance, 
Julia



Papers mentioned:
Petersen (2009), "Estimating Standard Errors in Finance Panel Data Sets" 
Thompson (2011), "Simple Formulas for Standard Errors that Cluster by Both Firm and Time"
*
*   For searches and help try:
*   http://www.stata.com/help.cgi?search
*   http://www.stata.com/support/faqs/resources/statalist-faq/
*   http://www.ats.ucla.edu/stat/stata/


© Copyright 1996–2014 StataCorp LP   |   Terms of use   |   Privacy   |   Contact us   |   Site index