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From |
Gordon Hughes <G.A.Hughes@ed.ac.uk> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: Serial Correlation |

Date |
Sat, 05 Feb 2011 12:04:51 +0000 |

But, equally, important - expand the size of your panel if at all possible. Gordon Hughes g.a.hughes@ed.ac.uk Date: Fri, 4 Feb 2011 15:14:33 -0300 (ART) From: =?utf-8?Q?Gabriel_Nicol=C3=A1s_Michelena?= <hmg@mrecic.gov.ar> Subject: Re: st: Serial Correlation

Regards! - ----- Mensaje original ----- De: "Robert Mills" <R.Mills@sms.ed.ac.uk> Para: statalist@hsphsun2.harvard.edu Enviados: Viernes, 4 de Febrero 2011 12:46:39 Asunto: st: Serial Correlation Hi all, I'm performing a panel data regression across six countries and ten years in Stata. I'm a little confused as to which methodology I should use, so far I have: Run my regression in OLS, then used the Breush-Pagan Lagrange Multiplier Test, which rejected the null hypothesis that the variance of errors is zero (homoskedastic), thus OLS is inconsistent so I need to use Random or Fixed Effects I've used a Hausman Test in which determined Random effects to be inconsistent, so I'm going to use Fixed Effects. So my errors are heteroskedastic, and I need to correct for this - do I simply use robust standard errors in Stata? Or should I use the Huber-White Standard Errors? Or are these the same thing? I've read that using Huber-White Standard Errors requires no serial correlation in error terms. To check for this, I need to perform a Durbin-Watson Test, and if I find serial correlation, use Prais-Winsten (GLS) to correct this. However, can you use GLS for fixed effects? And if so, how do you do this in Stata? Or, should I use Newey West Standard Errors, which correct for both heteroskedasticity and for serial correlation (AR 1). This would seem like the best option, but I'm not sure if you can use NW SE's for fixed effects? If so, how is this done in stata? Thanks in advance for any help you may have! Cheers, Robert Mills At 07:33 05/02/2011, you wrote:

Date: Fri, 4 Feb 2011 15:14:33 -0300 (ART) From: =?utf-8?Q?Gabriel_Nicol=C3=A1s_Michelena?= <hmg@mrecic.gov.ar> Subject: Re: st: Serial CorrelationUnder Heterocedasticity the OLS estimators are still consistent, butt-stastic are no the right ones because you are using the wrong VCEmatrix. You solve this problem just adding robust option in the regression.If you suspect that are individidual effects in you model, then youshould use Fixed or Random Effects for a better estimation. In myopinion you should pick one or another model depending of thecharacteristic of the model that you are working on. In this case,previous works on the matter always help. Again, if you suspect ofserial correlation, the easy solution is employ the robust VCE matrix again.Regards! - ----- Mensaje original ----- De: "Robert Mills" <R.Mills@sms.ed.ac.uk> Para: statalist@hsphsun2.harvard.edu Enviados: Viernes, 4 de Febrero 2011 12:46:39 Asunto: st: Serial Correlation Hi all, I'm performing a panel data regression across six countries and ten years in Stata. I'm a little confused as to which methodology I should use, so far I have: Run my regression in OLS, then used the Breush-Pagan Lagrange Multiplier Test, which rejected the null hypothesis that the variance of errors is zero (homoskedastic), thus OLS is inconsistent so I need to use Random or Fixed Effects I've used a Hausman Test in which determined Random effects to be inconsistent, so I'm going to use Fixed Effects. So my errors are heteroskedastic, and I need to correct for this - do I simply use robust standard errors in Stata? Or should I use the Huber-White Standard Errors? Or are these the same thing? I've read that using Huber-White Standard Errors requires no serial correlation in error terms. To check for this, I need to perform a Durbin-Watson Test, and if I find serial correlation, use Prais-Winsten (GLS) to correct this. However, can you use GLS for fixed effects? And if so, how do you do this in Stata? Or, should I use Newey West Standard Errors, which correct for both heteroskedasticity and for serial correlation (AR 1). This would seem like the best option, but I'm not sure if you can use NW SE's for fixed effects? If so, how is this done in stata? Thanks in advance for any help you may have! Cheers, Robert Mills

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