The DOI matches its Crossref record; 7 of the 7 references it cites were found in a registry or an index.
Robust Standard Errors for Panel Regressions with Cross-Sectional Dependence
Open accessAbstract
I present a new Stata program, xtscc, that estimates pooled ordinary least-squares/weighted least-squares regression and fixed-effects (within) regression models with Driscoll and Kraay (Review of Economics and Statistics 80: 549–560) standard errors. By running Monte Carlo simulations, I compare the finite-sample properties of the cross-sectional dependence–consistent Driscoll–Kraay estimator with the properties of other, more commonly used covariance matrix estimators that do not account for cross-sectional dependence. The results indicate that Driscoll–Kraay standard errors are well calibrated when cross-sectional dependence is present. However, erroneously ignoring cross-sectional correlation in the estimation of panel models can lead to severely biased statistical results. I illustrate the xtscc program by considering an application from empirical finance. Thereby, I also propose a Hausman-type test for fixed effects that is robust to general forms of cross-sectional and temporal dependence.
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Cites
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Fama, E. F., & French, K. R. (1993) · Journal of Financial Economics · doi:10.1016/0304-405x(93)90023-5 · Cited by 25,754
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Hausman, J. A. (1978) · Econometrica · doi:10.2307/1913827 · Cited by 18,820
How Much Should We Trust Differences-in-Differences Estimates?
Bertrand, M., Duflo, E., & Mullainathan, S. (2004) · The Quarterly Journal of Economics · doi:10.1162/003355304772839588 · Cited by 10,641
Microeconometrics: Methods and Applications
Cameron, A. C., & Trivedi, P. K. (2005) · doi:10.1017/cbo9780511811241 · Cited by 8,092
The use of ranks to avoid the assumption of normality implicit in the analysis of variance
Friedman, M. (1937) · Journal of the American Statistical Association · doi:10.1080/01621459.1937.10503522 · Cited by 7,005
Consistent Covariance Matrix Estimation with Spatially Dependent Panel Data
Driscoll, J. C., & Kraay, A. C. (1998) · Review of Economics and Statistics · doi:10.1162/003465398557825 · Cited by 6,865
What To Do (and Not to Do) with Time-Series Cross-Section Data
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Kim, E.-H., & Lyon, T. P. (2015) · Organization Science · doi:10.1287/orsc.2014.0949 · Cited by 932
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Añón Higón, D., Gholami, R., & Shirazi, F. (2017) · Telematics and Informatics · doi:10.1016/j.tele.2017.01.001 · Cited by 635
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Beugelsdijk, S., & Welzel, C. (2018) · Journal of Cross-Cultural Psychology · doi:10.1177/0022022118798505 · Cited by 461
“For a discussion of these econometric issues, we refer to Hoechle (2007) and Tiokhin and Hruschka (2017).”
BackgroundSpatial Panel-data Models Using Stata
Belotti, F., Hughes, G., & Mortari, A. P. (2017) · The Stata Journal: Promoting communications on statistics and Stata · doi:10.1177/1536867x1701700109 · Cited by 426
Metadata
- Authors
- Hoechle, D.
- Venue
- The Stata Journal: Promoting communications on statistics and Stata
- Publisher
- SAGE Publications
- Published
- 2007-09
- Volume
- 7
- Issue
- 3
- Pages
- 281-312
- ISSN
- 1536-867X (ISSN-L)
- 1536-8734
- OpenAlex
- W2170433190
- Cited by
- 3,333
- References
- 7
- FWCI
- 33.53
- Type
- journal article
- Language
- en
- Open access
- bronze
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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