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From |
Richard Williams <richardwilliams.ndu@gmail.com> |

To |
statalist@hsphsun2.harvard.edu, <statalist@hsphsun2.harvard.edu> |

Subject |
Re: st: heteroskedasticity in ordered probit model |

Date |
Sun, 23 Dec 2012 09:19:26 -0500 |

At 06:25 AM 12/23/2012, John Stymans wrote:

Dear Statalist Users, I have a problem with heteroskedasticity in an oprobit model. I am using Stata 12.I am new to econometrics and Stata, however I would like to estimatean equation with following set-up (number of observations are around 200) ;Dependent variable (y) is ordered (0-no, 1- sometimes, 2- a lot)over 2 countries, so I use a country dummy as independent variable.Other independent variables are: size, budget, service, R&D.Given the dependent I used an ordered probit model.Setup in Stata is the following: oprobit y size budget service R&Dcountry dummyYet literature (e.g. Cameron and Trivedi (2009) MicroeconometricsUsing Stata, chapter 14 page 455) says the above model has aweakness: heteroskedasticity. So I decided to test this and Icompared the model with one including a heteroskedasticity term.This term included budget. A Likelihood ratio test confirmed thepresence of heteroskedasticy as did a Wald test.Setup in Stata: oglm y size budget service R&D country dummy,link(probit) het(budget)When comparing results, I noticed that 2 terms which are notsignificant in the first equation without heteroskedasticity termare actually significant in the equation with heteroskedasticityterm. Is this possible: can heteroskedasticity affect thesignificance of variables, or is something else going on?

http://www.nd.edu/~rwilliam/oglm/oglm_Stata.pdf

In a second step I would like to run a Mont Carlo simulation (I willhave to figure this out, any advice on how to run such a thing isgreatly appreciated) with a similar setup and check the above. Isthis possible, can I use a Monte Carlo simulation to check ifheteroskedasticity influences the significance of variables?There is a lot of literature on the effect of heteroskedasticity onsize of determinants (which often uses Monte Carlo simulations), yetI did not find any using Monte Carlo to check the significance (canhowever be my fault).Many thanks in advance and best regards, JOhn * * 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/

------------------------------------------- Richard Williams, Notre Dame Dept of Sociology OFFICE: (574)631-6668, (574)631-6463 HOME: (574)289-5227 EMAIL: Richard.A.Williams.5@ND.Edu WWW: http://www.nd.edu/~rwilliam * * 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/

**References**:**st: heteroskedasticity in ordered probit model***From:*John Stymans <johnstymans@hotmail.be>

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