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re: Antwort: re: Antwort: re: st: xtreg xtregar


From   Christopher Baum <kit.baum@bc.edu>
To   <statalist@hsphsun2.harvard.edu>
Subject   re: Antwort: re: Antwort: re: st: xtreg xtregar
Date   Tue, 4 Jan 2011 15:53:06 -0500

<>
For the simplest model (an AR(1) in y_t), the Nickell bias is of the order - (1+\rho) / (T-1), where \rho is the coefficient on the LDV and T is the number of timeseries observations. 

If the true \rho is 0.5, and T=10 (a long panel by DPD standards!) the bias is -0.167, or 33% of the true coefficient, so that its estimate is seriously attenuated.
The inclusion of additional regressors does not remove this bias; indeed, if the regressors are correlated with the lagged dependent variable to some degree, their coefficients may be seriously biased as well.

Kit



Kit Baum   |   Boston College Economics & DIW Berlin   |   http://ideas.repec.org/e/pba1.html
                              An Introduction to Stata Programming  |   http://www.stata-press.com/books/isp.html
   An Introduction to Modern Econometrics Using Stata  |   http://www.stata-press.com/books/imeus.html


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