Re: [Gretl-devel] RFC: $sigma & co.

On Thu, 1 May 2008, Sven Schreiber wrote: > Am 01.05.2008 12:54, Riccardo (Jack) Lucchetti schrieb: > >> >> Moreover, we have a slight inconsistency in the way we compute >> things: $sigma uses the asymptotic formula (ie, E'E over T), while in >> the displayed equations we use degrees-of-freedom corrected figures >> for standard errors. I'm not overly bothered by this, but some may. > > What about $sigma in other contexts, is that asymptotic or > dof-corrected? I think that should be made consistent. I'm all for consistency in general, but this case is difficult. In OLS estimation, for example, SSR/T and SSR/(T-k) are both consistent, but the latter has the additional small advantage of being unbiased under certain conditions, so that's traditionally what people use. I personally think it's rather silly to worry about this when you have a decent sample size; if you don't, well, I doubt very much you should be doing inference _at all_. In other contexts, Tobit models for example, you simply don't have a choice. In my view, the really important thing is that you know which formula is used in each case, so that if you feel like re-computing $sigma to your taste, you have the tools to do it.