Heteroskedasticity-Robust Standard Errors for Fixed Effects Panel Data Regression
James H. Stock, Mark W. Watson
Econometrica · 2008 · Volume 76 · Issue 1
DOI: 10.1111/j.0012-9682.2008.00821.x
Abstract
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 periodsTis fixed (and greater than 2) as the number of entitiesnincreases. We provide a bias-adjusted HR estimator that is -consistent under any sequences (n,T) in whichnand/orTincrease to ∞. This estimator can be extended to handle serial correlation of fixed order.
Keywords
White standard errors, longitudinal data, clustered standard errors
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