st: Re: comparing xtgls and xtreg,re

["Rodrigo A. Alfaro" <raalfaroa@gmail.com>]

Nicola,

-xtreg, re- allows to have an unobserved component in the error term which 
is random, then the loglikelihood has a composed error term that requires 
assumptions on the distribution of u(i) and e(i,t)... convention says that 
both are normal. Similar approach is applied in frontier models, but there 
the distribution of u(i) is half-normal or gamma.

-xtgls- is GLS for panel data, asumming some structure for the distribution 
of e(i,t). For example, in terms of variances, correlations 
(cross-sectional) or autocorrelations (time series). The default is no 
correlation accross panels, homoscedastic errors and no autocorrelation, ie 
iid errors across panels and time... the latter is the same assumption of 
the standard LS (-reg-). You can get the same standard errors than -reg- 
adding the option -nmk- to xtlgs as follows:

xtgls n w k ys yr198*, nmk

Rodrigo.




----- Original Message ----- 
From: <nicola.baldini2@unibo.it>
To: <statalist@hsphsun2.harvard.edu>
Sent: Monday, July 09, 2007 7:44 AM
Subject: st: comparing xtgls and xtreg,re



> Given that -xtreg, re- is referred to on the help file as "GLS 
> random-effects (RE) model", I am puzzled that -xtgls- with default options 
> (and -xtpcse-) produces the same coefficients as -regress- and different 
> from both -xtreg, re- and -xtreg, mle-. Why? Most importantly, which 
> should I trust???
> Moreover, -xtgls- and -regress- produce almost identical standard errors. 
> I don't think it depends on my data, e.g. take some panels on the web and 
> confront:
> webuse abdata
> xtreg n w k ys yr198*
> regress n w k ys yr198*
> xtgls n w k ys yr198*
> Please note that I use Stata 9.2
>
> Nicola
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