topic Re: Testing for Heteroscedasticity in Panel Data in SAS Forecasting and Econometrics

Testing for Heteroscedasticity in Panel Data

MattvanPallen — Fri, 16 May 2014 11:48:37 GMT

Hi Again!

Hope this is the last time I'm forced to bother you, as the sas help doc is for me

I wanted to test for heteroscedasticity in my panel data sample and eventually correct it.

My model:

FE=FELO FEUP FE_L FELOWER FEUPER;

FELO - dummy (1 if below FE_L Q1)

FEUP - dummy (1 if above FE_L Q1)

FE_L - laged FE

FELOWER = FELO*FE_L

FEUPER =FEUP*FE_L

On SAS Help I can only find the example with "incomes" which is not as complicated as my...

I would really appreciate your time and concern.

Re: Testing for Heteroscedasticity in Panel Data

ets_kps — Wed, 28 May 2014 16:44:42 GMT

Hello and thanks for the question.

There are two parts to your question. If you want to conduct a Breusch-Pagan test which is requested as an option on the MODEL statement in PROC PANEL.

SAS/ETS(R) 13.1 User's Guide

The second, and frankly what I would do, is to just assume you have heteroskedasticity and autocorrelation and correct for it using the HAC=NEWEYWEST option on the MODEL statement.SAS/ETS(R) 13.1 User's Guide

If you wanted to employ simply Heteroskedastic-corrected se's you can do that here.

SAS/ETS(R) 13.1 User's Guide

Good luck and let us know if you need anything else. -Ken

Re: Testing for Heteroscedasticity in Panel Data

rohitg — Sun, 27 Sep 2015 20:13:57 GMT

Hi,

I was trying to follow your steps using SAS 9.4, but it is not working: I need to test if there is any hetroscedasticity and also how I can correct it.

proc panel data=mydata;

model y=x1 x2 x3 x4/RANTWO HAC=NEWEYWEST;

id firm time;run;

Please help!

..Rohit

Re: Testing for Heteroscedasticity in Panel Data

SteveDenham — Tue, 29 Sep 2015 12:18:24 GMT

In 9.4 (SAS/ETS 14.1), the specification is now:

HAC(neweywest94)

NEWEYWEST (parameters inserted for gamma, rate and constant, if you want something other than the default)

Hope this helps.

Steve Denham

Re: Testing for Heteroscedasticity in Panel Data

rohitg — Tue, 29 Sep 2015 20:16:50 GMT

Hey, Thanks for your reply! I have access to 9.4 (SAS/ETS 13.2).

To correct heteroscedasticity, I have succesfully tried and used:

proc panel data=mydata;

model y=x1 x2 x3 x4/RANTWO HAC(BANDWIDTH=NEWEYWEST94);

id firm time;run;

Could you please suggest some way through which I can check for hetroscedsaticty in my panel data before looking for any correction ?

Thanks.

Rohit