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st: RE: Two level fixed effect with Newey-West standard errors


From   "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   st: RE: Two level fixed effect with Newey-West standard errors
Date   Wed, 4 Dec 2013 14:47:35 +0000

Mohamad,

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-
> statalist@hsphsun2.harvard.edu] On Behalf Of Mohamad Mahmoud
> Sent: 03 December 2013 15:44
> To: statalist
> Subject: st: Two level fixed effect with Newey-West standard errors
> 
> Hi,
> I need to estimate a two level fixed effects model with Newey-West
> standard errors. I use -xtivreg2- and I know that it does the job, however it is
> extremely slow. I am using a very large database (6 million observations, 30
> covariates, 4000 company fixed effects, 5000 date fixed effects) and it takes
> multiple hours for each regression.
> is there a fast command to execute this?

-xtivreg2- supports only 1-way fixed effects, so I am not sure how you are doing this.  Are you including dummies for the date FEs and letting -xtivreg2- handle the company FEs?

In any case, you might be able to speed things up by partialling out the date and company FEs by hand (i.e., transform your data by 2-level demeaning), and then just use -ivreg2-.  Depending on your choice of covariance estimator, you might have to adjust the variance/SEs by hand afterwards for the loss of degrees of freedom from the FEs, but that's not too hard.

HTH,
Mark
 
> Thanks,
> Mohamad Mahmoud
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