Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Jan, 2008, Volume 76, Issue 1

Heteroskedasticity‐Robust Standard Errors for Fixed Effects Panel Data Regression

https://doi.org/10.1111/j.0012-9682.2008.00821.x
p. 155-174

James H. Stock, Mark W. Watson

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 periods is fixed (and greater than 2) as the number of entities increases. We provide a bias‐adjusted HR estimator that is ‐consistent under any sequences (, ) in which and/or increase to ∞. This estimator can be extended to handle serial correlation of fixed order.


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