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


From   thomas bourveau <thomas.bourveau@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Petersen (2009) vs Thompson (2011) - Estimating standard errors in panel data sets
Date   Tue, 4 Dec 2012 21:33:20 +0100

Dear Roger,

I have a similar question on my current project, so I get your point
and here are the full references of the abovementioned paper :

- Petersen, M. A. (2009)  "Estimating standard errors in finance panel
data sets: Comparing approaches" Review of Financial Studies, vol.  22
pp. 435-480.

- Thompson, S. B. (2011) "Simple formulas for standard errors that
cluster by both firm and time" Journal of Financial Economics, vol. 99
pp. 1-10.

2012/12/4 Roger B. Newson <r.newson@imperial.ac.uk>:
> It is probably a good idea here to give the references in full, ie with the
> journal title, volume and pages. Otherwise, very few of us will know which
> paper you are referring to.
>
> Best wishes
>
> Roger
>
> Roger B Newson BSc MSc DPhil
> Lecturer in Medical Statistics
> Respiratory Epidemiology and Public Health Group
> National Heart and Lung Institute
> Imperial College London
> Royal Brompton Campus
> Room 33, Emmanuel Kaye Building
> 1B Manresa Road
> London SW3 6LR
> UNITED KINGDOM
> Tel: +44 (0)20 7352 8121 ext 3381
> Fax: +44 (0)20 7351 8322
> Email: r.newson@imperial.ac.uk
> Web page: http://www.imperial.ac.uk/nhli/r.newson/
> Departmental Web page:
> http://www1.imperial.ac.uk/medicine/about/divisions/nhli/respiration/popgenetics/reph/
>
> Opinions expressed are those of the author, not of the institution.
>
>
> On 04/12/2012 17:45, Julia Ke wrote:
>>
>> 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"
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-- 
Thomas Bourveau
thomas.bourveau@gmail.com
0637573925
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