Fixed Effects and First Differences comparison - part 2
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- Опубликовано: 9 сен 2024
- This video explains some of the differences between Fixed Effects and First Differences estimators, indicating when it is preferable to use one over the other.
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so they only differ in standard errors ? do they produce the same coefficients
They should, as they are both unbiased and consistent (previous video)
How would you test for covariance between the error terms in Stata?
You can run the regression (whatever it is you're doing, FE, FD... ) and then use command: predict vfe, r. This creates a new variable I called "vfe" with the predicted residuals from the last regression. Then do a command pwcorr l.vfe l1.vfe l2.vfe l3.vfe ... This shows you all pairwise correlations of error terms. If you see a pattern/trend of the correlations over time, this means you have some form of serial correlation
Oh great! Thanks. I've finished my project but I'll be sure to use this info for my next one.
Well do you actually test for covariance in the *error* terms?
Btw, do you have any advice on when and how one can use the residuals to test hypotheses about the error? I am still struggling to understand their relationship to each other.
@@cre8ivartist when you do these how do you know if they are significant or not?
@@catherinebouckley4896 I did this 4 years ago at university and haven't thought about it since! In fact it's very odd reading my comment - I can't believe it was me who wrote it!