Re: [Gretl-users] Thanks on Allison's alternative Hausman test / No joy on PCSEs
On Thu, 27 Dec 2012, Clive Nicholas wrote:
Allin Cottrell <cottrell(a)wfu.edu> replied:
Beck-Katz does:
>
> Var(b) = A^{-1} W A^{-1}
>
> where A = \sum_{i=1}^n X'_i X_i,
> W = \sum_{i=1}^n \sum_{j=1}^n \sigma_{ij} X'_i X_j
> and \sigma_{ij} is estimated as (1/T) \sum_{t=1}^T e_i e_j,
> with the e's being OLS (or fixed effects) residuals.
>
> The trouble is there's no guarantee that W (which is supposed
> to be a variance measure) is positive definite in unbalanced
> panels; if it's not, we "fail".
>
>> Also, which standard errors are reported instead?
>
> The "classical" ones. If the Arellano method is used you'll
> see "Robust (HAC) standard errors".
Fair enough, Allin, although I don't think I'll ever be fitting FE models
to balanced panel data any time soon! Thanks once again.
Not all unbalanced panels provoke a problem with PCSEs. From brief
experimentation it seems that strong collinearity among the
regressors is a contributory problem.
Allin Cottrell