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From |
"Schaffer, Mark E" <[email protected]> |

To |
<[email protected]> |

Subject |
RE: st: Fixed Effects GLS |

Date |
Tue, 12 Apr 2011 11:28:47 +0100 |

```
Andrea,
> -----Original Message-----
> From: [email protected]
> [mailto:[email protected]] On Behalf Of
> Andrea Morescalchi
> Sent: Tuesday, April 12, 2011 9:57 AM
> To: [email protected]
> Subject: Re: st: Fixed Effects GLS
>
> Dear Ada and Maysa,
> I was trying too to estimate the FEGLS as presented in
> Wooldridge (2002), but with only one error component.
>
> Anyway, I cannot understand properly the first line of
> Ada's response: "Fixed Effects model is a kind of GLS
> model. Use the basic FE commands and you will be fine."
> I red carefully the Chapter 10 in Wooldridge, but I cannot
> see among the - xtreg, FE - options available which is
> that for doing FEGLS. In particular, the options available
> for vce are: conventional, robust, cluster, bootstrap, or
> jackknife.
> FEGLS implies a particular structure for the (T-1)*(T-1)
> covariance matrix for the errors, i.e. the matrix is
> estimated after a standard FE in the first step where this
> matrix is an identity matrix multiplicated for the
> T-constant variance parameter.
> Among FE Stata options the most proper to do FEGLS would
> seem: "vce(conventional), the default, uses the
> conventionally derived variance estimator for generalized
> least squares regression". This line is a bit strange to
> me since it seems to imply that the standard FE Stata
> regression is actually a FEGLS!
It is indeed, and not just in Stata. The FE estimator is, by
definition, a GLS estimator.
I am sure this is discussed in Jeff Wooldridge's book somewhere (there's
a 2010 edition out, by the way), but I don't have it handy and can't
direct you to the right chapter/page. Another place you might look is
Arellano's 2003 book, "Panel Data Econometrics". In chapter 2 (I think)
he shows that the FE estimator is the GLS estimator obtained after
applying the first-differencing transformation.
--Mark
> I computed the FE and the
> FEGLS separately in Matlab and it turns out that the
> "conventional" Stata FE is identical to that with error
> v-c matrix equal to an identity matrix (multiplicated for
> sigma_u). But which is the option which tells Stata to
> estimate the v-c matrix in the first step?
>
> Thanks in advance
> Andrea
>
> On Tue, 12 Apr 2011 00:09:11 +0000
> "Ada Ma" <[email protected]> wrote:
> >Fixed Effects model is a kind of GLS model. Use the basic
> >FE commands and you will be fine.
> >
> > There are user written commands for two way FEs but I
> >can't remember the commands' names, sorry! There are two
> >of them and they r both featured in the Stata Journal,
> >one of the authors for one command is Upward. HTH.
> >
> >
> > Sent using BlackBerry(r)
> >
> > -----Original Message-----
> >From: May Ster <[email protected]>
> > Sender: [email protected]
> > Date: Mon, 11 Apr 2011 23:10:06
> > To: <[email protected]>
> > Reply-To: [email protected]: st:
> >Fixed Effects GLS
> >
> > Dear Statalist,
> >
> > I tried reading Woolridge (2002), Chapter 10 after he
> >mentioned
> > choosing between Random effects model and Fixed effects
> >model, he does
> > mentioned 'Fixed Effects GLS".
> >
> > I'm not sure how does this apply to STATA command if i
> >want to use
> > 'Fixed Effects GLS".
> >
> > If my model is a two-way fixed effects model, Basically,
> >is the 'Fixed
> > Effects GLS" can be written like this (i've checked for
> >serial
> > correlation in error terms) ;
> >
> > xi: xtgls var1 var2 var3 i.year , panel(hetero)
> >corr(psar1)
> >
> >
> > Please help.
> >
> > Thank you very much in advance
> >
> > Maysa
> > *
> > * For searches and help try:
> > * http://www.stata.com/help.cgi?search
> > * http://www.stata.com/support/statalist/faq
> > * http://www.ats.ucla.edu/stat/stata/
> >
> > *
> > * For searches and help try:
> > * http://www.stata.com/help.cgi?search
> > * http://www.stata.com/support/statalist/faq
> > * http://www.ats.ucla.edu/stat/stata/
>
> *
> * For searches and help try:
> * http://www.stata.com/help.cgi?search
> * http://www.stata.com/support/statalist/faq
> * http://www.ats.ucla.edu/stat/stata/
>
--
Heriot-Watt University is a Scottish charity
registered under charity number SC000278.
*
* For searches and help try:
* http://www.stata.com/help.cgi?search
* http://www.stata.com/support/statalist/faq
* http://www.ats.ucla.edu/stat/stata/
```

**Follow-Ups**:**Re: st: Fixed Effects GLS***From:*"Andrea Morescalchi" <[email protected]>

**References**:**st: Fixed Effects GLS***From:*May Ster <[email protected]>

**Re: st: Fixed Effects GLS***From:*"Ada Ma" <[email protected]>

**Re: st: Fixed Effects GLS***From:*"Andrea Morescalchi" <[email protected]>

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