Heteroskedasticity-robust standard errors for fixed effects panel data regression

James H. Stock, Mark W. Watson

Research output: Contribution to journalArticle

229 Scopus citations

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

Original languageEnglish (US)
Pages (from-to)155-174
Number of pages20
JournalEconometrica
Volume76
Issue number1
DOIs
StatePublished - Jan 1 2008

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • Clustered standard errors
  • Longitudinal data
  • White standard errors

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