Re: RE : RE : Heteroskedasticity and fixed effects (was: st: RE: Re: Weak instruments)

[David Airey <david.airey@vanderbilt.edu>]

.

This discussion reminds me of an older paper about the ttest:

Homogeneity of variance in the two-sample means test by Moser and  
Stevens. The American Statistician Vol. 46, No. 1, (Feb., 1992), pp.  
19-21.

The authors looked at the practice of testing for differences in  
variance before using the Smith/Welch/Satterthwaite ttest, and also  
looked at power in the face of difference sample sizes between the two  
groups and variances.

Cheers,

-Dave


On Jul 18, 2008, at 7:22 AM, Gaul� Patrick wrote:


> Dear statalisters,
>
> I read with great interest the posts on the merits of robustfying  
> from yesterday. Thanks in particular to Mark Schaffer for  
> elaborating on my (or rather Stock and Watson's) suggestion that "In  
> practice, it just makes more sense to always use robust standard  
> errors [rather than the usual standard errors]".
>
> I routinely use robust standard errors rather than the the usual  
> standard errors and the arguments raised yesterday did not really  
> convince me that this might not be a good idea. If I recap the  
> arguments as I understood them:
>
> a) robustifying will not help if the model is misspecified.
>
> Certainly, but then neither will the use of the usual standard errors.
>
> b) robustifying might result in losing power, particularly in small  
> and medium samples.
>
> Sure, but if there is heteroskedasticity the usual standard errors  
> will be inconsistent. So this suggests that some other ways to  
> address heteroskedasticity should be explored, not that the usual  
> standard errors should be used. If there is homoskedasticity, then I  
> indeed would be better off with the usual standard errors but I  
> suspect that homoskedasticity is the exception rather than the rule  
> and that heteroskedasticity is much more prevalent in practice.
>
> c) if the model is correctly specified, then robustifying makes very  
> little difference.
>
> Perhaps, but that's hardly an argument for not using robust standard  
> errors.
>
> Patrick Gaul�
>
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