Programming the statistical procedures from SAS

PROC MIXED, panel data and fixed effects

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PROC MIXED, panel data and fixed effects

Hi all

I have an unbalanced cross section (firms) time series (years)
dataset. I would like to treat both firm and year effects as fixed and
allow for a time-wise autoregressive and cross-sectional
heteroscedastic covariance. In particular, I would like to allow for
the following error covariance structure: AR(1) within firms and
heteroscedasticity across firms
.

The code I came up with is the following:

PROC MIXED DATA=mydata;
CLASS firmid year;
MODEL y = firmid year x1 x2 x3 /SOLUTION;
REPEATED /SUBJECT=firmid TYPE=AR(1) GROUP=firmid;
RUN;

The problem is that SAS cannot estimate this. The answer I get is
"Convergence status: Warning, did not converge". However, when I try
to estimate the model by employing only the fixed effects (delete the
REPEATED line) or only the aforementioned error covariance structure
(delete the CLASS line and firmid year from the MODEL line) everything
is OK.

How can I estimate the model (preferably in PROC MIXED) by employing
simultaneously the fixed effects and the aforementioned error
covariance structure? Is something wrong with the code I wrote?

Any help is greatly appreciated, as I have a deadline approaching…

Thanks in advance,
Costas
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