Heteroskedasticity-Robust Standard Errors for Fixed Effects Panel Data Regression / James H. Stock, Mark W. Watson.

Format:

Book

Author/Creator:

Stock, James H.

Contributor:

National Bureau of Economic Research.

Watson, Mark W.

Series:

Technical Working Paper Series (National Bureau of Economic Research) no. t0323.

NBER technical working paper series no. t0323

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

The conventional heteroskedasticity-robust (HR) variance matrix estimator for cross-sectional regression (with or without a degrees of freedom adjustment), applied to the fixed effects estimator for panel data with serially uncorrelated errors, is inconsistent if the number of time periods T is fixed (and greater than two) as the number of entities n increases. We provide a bias-adjusted HR estimator that is (nT)1/2 -consistent under any sequences (n, T) in which n and/or T increase to ∞.The conventional heteroskedasticity-robust (HR) variance matrix estimator for cross-sectional regression (with or without a degrees of freedom adjustment), applied to the fixed effects estimator for panel data with serially uncorrelated errors, is inconsistent if the number of time periods T is fixed (and greater than two) as the number of entities n increases. We provide a bias-adjusted HR estimator that is (nT)1/2 -consistent under any sequences (n, T) in which n and/or T increase to ∞.

Notes:

Print version record

June 2006.