Bookmark and Share

Notice: On April 23, 2014, Statalist moved from an email list to a forum, based at

[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

st: lag length for newey west estimator

From   Bulent Koksal <>
Subject   st: lag length for newey west estimator
Date   Wed, 6 Apr 2011 17:23:11 +0300

Hello All,

   I have an unbalanced panel data set consisting of stock returns. I
want to use newey-west errors for heteroskedasticity and serial
correlation. In addition, one of the RHS variables is endogenous. So I
will use lags of this variable as instruments.

my model is

y1=alpha0+alpha1 y2 + beta1 x1 + beta2 x2 + beta3 x3 +error

where y1 and y2 are endogenous.

If I am not mistaken, I can do this by xtivreg2. Something like

xtivreg2 y1 x1 x2 x3 (y2= l(1/2).y2), fe bw(1+L) robust

where L is the required lag length for Newey-West estimator.

Two questions:

Greene (econometric analysis) states that in practice the smallest
integer greater than equal to n^0.25 is used to determine L. For a
panel data set, should I take n to be the overall sample size , or the
size of the stock that has the longest time series? The latter seems
to be the correct choice but I am not sure.

While using lags of a variable as its instruments, how do we decide
for the correct number of lags, assuming that sample size is not a

Thanks in advance for any help.

Bülent Köksal

*   For searches and help try:

© Copyright 1996–2018 StataCorp LLC   |   Terms of use   |   Privacy   |   Contact us   |   Site index