Evaluating one-way and two-way cluster-robust covariance matrix estimates
This presentation updates Nichols and Schaffer's 2007 UKSUG talk on clustered standard errors. Although cluster-robust standard errors are now recognized as essential in a panel data context, official Stata only supports clusters that are nested within panels. This rules out the possibility of defining clusters in the time dimension, and modeling contemporaneous dependence of panel units' error processes. We build upon recent analytical developments that define 2-way (and conceptually n-way) clustering, and the implementation in 2010 of 2-way clustering in the widely used ivreg2 and xtivreg2 packages. We present examples of the utility of 1-way and 2-way clustering using Monte Carlo techniques, a comparison with alternative approaches to modeling error dependence, and consider tests for clustering of errors.
When requesting a correction, please mention this item's handle: RePEc:boc:bost10:11. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.