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From |
"Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk> |

To |
<statalist@hsphsun2.harvard.edu> |

Subject |
st: RE: Re: IVREG2 and Multi-way Clustering |

Date |
Mon, 30 Jan 2012 22:31:26 -0000 |

Jessie, "Coincidence" was probably not the right way to put it - sorry. If you check out the Cameron slides you originally spotted, http://www.stata.com/meeting/mexico11/materials/cameron.pdf and go to slide 22 (the one I pointed to in my previous post) on the asymptotic variance of the OLS estimator, and multiply out the expression for AVar(beta_hat) at the top, inserting the expression for B_hat in the bottom, you'll get the expression at the top of slide 23. This should show pretty clearly the relationship between the B_hat for 2-way clustering, the AVar(beta_hat) for 2-way clustering, and the AVars for 1-way clustering and heteroskedasticity ("G intersects H" in the slides). --Mark > -----Original Message----- > From: owner-statalist@hsphsun2.harvard.edu > [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Jessie C > Sent: 29 January 2012 23:24 > To: statalist@hsphsun2.harvard.edu > Subject: st: Re: IVREG2 and Multi-way Clustering > > Mark, > > Thank you for your continued patience. I am very grateful > for you continuing to take the time to help. > > I am confused though as to why what I did was just a > coincidence. I looked around some more and just found > another paper by Cameron and > Gelbach: > www.econ.ucdavis.edu/working_papers/10-7.pdf, p. 14 > > It says that the two-way clustering is based on a one-way > clustering formula: > > "For two-way clustering this robust variance estimator is > easy to implement given software that computes the usual > one-way cluster-robust estimate. We obtain three different > cluster-robust \variance" matrices for the estimator by > one-way clustering in, respectively, the first dimension, the > second dimension, and by the intersection of the first and > second dimensions. Then add the first two variance matrices > and, to account for double-counting, subtract the third. > Thus V_{two-way}(beta) = V_1(beta) + V_2(beta) - V{1 > intersection 2}(beta)." > > On Sun, Jan 29, 2012 at 4:42 PM, Jessie C <jessiecoh@gmail.com> wrote: > > Mark, > > > > Thank you very much for your response and for taking the > time to help > > out. I greatly appreciate it. > > > > 1. Your example makes sense of the 2 X 2. z_1 has 2 clusters. z_2 > > has 2 clusters. The union of z_1 and z_2 is 4 clusters but also 4 > > observations. > > > > I don't quite understand then the 2-way clustering formula > in terms of > > 1-way clusters. > > > > Cameron, Gelbach, and Miller say: > > > > 1. OLS regression of y on X with variance matrix estimate computed > > using clustering on g in the set of {1, 2, ...G}; 2. OLS > regression of > > y on X with variance matrix estimate computed using > clustering on h > > in the set of {1, 2, ...H}; 3. OLS regression of y on X > with variance > > matrix estimate computed using clustering on (g, h) in the set of > > {(1, 1), ..., (G, H)}; > > > > Given these three components, V[beta] is computed as the sum of the > > ...first and second components, minus the third component. > > > > I thought that would correspond with: > > i. reg y x, cluster(g) > > ii. reg y x, cluster(h) > > iii. reg y x, cluster(i) where egen i = group(g h) and the standard > > error is se(i) + se(ii) - se(iii) or > > sqrt(se(i)^2 + se(ii)^2 - se(iii)^2) > > > > I tried an example in Stata and it worked out using the > sqrt formula. > > Not sure if that's just a coincidence. > > > > * > * 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. Heriot-Watt University is the Sunday Times Scottish University of the Year 2011-2012 * * 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/

**References**:**st: IVREG2 and Multi-way Clustering***From:*Jessie C <jessiecoh@gmail.com>

**st: Re: IVREG2 and Multi-way Clustering***From:*Jessie C <jessiecoh@gmail.com>

**st: Re: IVREG2 and Multi-way Clustering***From:*Jessie C <jessiecoh@gmail.com>

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