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Re: st: Fwd: Panel Unit Root Test


From   Francesoc Paldini <f.paldini@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Fwd: Panel Unit Root Test
Date   Thu, 6 Dec 2012 15:20:57 +0100

Dear Yuval,

thank you very much.  Unfortunately, I can not read your answer (the
technical part, which starts with: "In a nutshell, unit root is a very
big problem in time-series" is missing).

I know the problem of "unit roots" in time series data. I'm wondering,
if those problems are existing in panel  applications (fixed effects
estimator), too.

Thanks again!
Frances


2012/12/6 Yuval Arbel <yuval.arbel@gmail.com>:
> There are several interesting applications to the unit-root hypothesis:
>
> According to the quantity theory of money M=kPY where M is the
> quantity of money, P is price level and Y is the GDP. The prominent
> prediction of the model is neutrality of money: if M increases by x%
> and Y is fixed P is expected to increase by x%.
>
> Note that if we convert this into a logarithmic form, it turns out
> that the model predicts a unit root as a coefficient of P and Y. In
> fact, somebody checked the theory based on the unit-root hypothesis.
>
> Another interesting application is based on a study I have just
> completed. The government gave public-housing tenants the option to
> purchase their renal units after a major discount, which vary from one
> period to another. We had the trail of the discount for each and every
> tenant, but we had to check this trail is random walk (otherwise
> tenants will anticipate the momentum and wait until the last day to
> exercise). Under these circumstances we ran a panel unit-root test,
> and the unit root hypothesis was not rejected.
>
> On Thu, Dec 6, 2012 at 6:11 AM, Yuval Arbel <yuval.arbel@gmail.com> wrote:
>> Frances,
>>
>> In a nutshell, unit root is a very big problem in time-series
>> analysis. If there is a unit root the series is a random walk and
>> explosive. This implies that the estimates are inefficient, and by
>> backward induction we can show that the SD estimates do not converge
>> anywhere. A simple way to explain it is to divide a series to
>> sub-samples. Imagine that the mean and SD of each sub-sample is
>> different.
>>
>> A simple way to address unit-root problems is to use a difference
>> series, i.e., Yt-Yt-1
>>
>> On Thu, Dec 6, 2012 at 5:17 AM, Francesoc Paldini <f.paldini@gmail.com> wrote:
>>> Hello Statalist,
>>>
>>> I'm working with dynamic panel data (unfortunately with small
>>> data sets) and I'm performing simple fixed effect estimations. Since T
>>> is pretty large (T=30), I don't care about the Nickel Bias.
>>>
>>> Actually, I don't get the concept of unit root tests for panel data?
>>> Under which circumstances are unit roots problematic?
>>>
>>> Does the asymptotic distribution theory require the estimator to
>>> satisfy the usual (time series) conditions that rule out unit and
>>> explosive roots? Do I need lots of cross-sectional units (in my case:
>>> N=20)?
>>>
>>> Best wishes,
>>> Frances
>>> *
>>> *   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/
>>
>>
>>
>> --
>> Dr. Yuval Arbel
>> School of Business
>> Carmel Academic Center
>> 4 Shaar Palmer Street,
>> Haifa 33031, Israel
>> e-mail1: yuval.arbel@carmel.ac.il
>> e-mail2: yuval.arbel@gmail.com
>
>
>
> --
> Dr. Yuval Arbel
> School of Business
> Carmel Academic Center
> 4 Shaar Palmer Street,
> Haifa 33031, Israel
> e-mail1: yuval.arbel@carmel.ac.il
> e-mail2: yuval.arbel@gmail.com
> *
> *   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/
*
*   For searches and help try:
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