[Gretl-users] F-test: Fixed Effects vs Pooled OLS

Bruno Gobeil bruno.gobeil at dunsky.com
Wed Jul 20 10:41:00 EDT 2016


Thanks very much for your quick response. It is much appreciated.

Regards,

Bruno Gobeil
Senior Consultant | Consultant principal
DUNSKY ENERGY CONSULTING | DUNSKY EXPERTISE EN ÉNERGIE 
[t] 514.504.9030  *26   [f] 514.289.2665   [e] bruno.gobeil at dunsky.com



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-----Original Message-----
From: gretl-users-bounces at lists.wfu.edu [mailto:gretl-users-bounces at lists.wfu.edu] On Behalf Of Sven Schreiber
Sent: July 20, 2016 10:36 AM
To: gretl-users at lists.wfu.edu
Subject: Re: [Gretl-users] F-test: Fixed Effects vs Pooled OLS

Am 20.07.2016 um 15:28 schrieb Bruno Gobeil:
> Hello!
>
>
>
> I would like to better understand the rational for using the following 
> formula for determining the denominator degrees of freedom for the
> F-test: n(t-1)-(k-1); where n is the number of regions, t the number 
> of years, k the number of parameters, including the constant. I 
> thought that the use of the de-meaned data approach compared to LSDV 
> approach for the fixed effects model would lead to a higher number of 
> denominator degrees of freedom, as suggested in the Gretl Guide, with 
> the following
> formula: nt-k.
>

If I understand your question correctly, then here is my answer: LSDV and de-meaned data fixed effects ("within" estimation) are equivalent for testing purposes. To put it differently, de-meaning is also a statistical estimation procedure, because you do not know the expected population values a priori and hence you have to estimate them via the arithmetic means. Hence you cannot gain d.o.f. by the within/de-meaned estimator.

This is not gretl-specific, of course.

hth,
sven
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