Compute robust standard errors

Reference no: EM131257045

Generate data by using the same DGP as that in section 5.3, and implement the first step of PO LS estimation to get the predicted variance varu. Now com-pare several different methods to implement tne second step or weigntea. estima-tion.

First, use regress with the modifier faweight..1/vartil , as in the text.

Second, manually implement this regression by generating the transformed variable tryry/sqrt (van) and regressing try on the similarly constructed variables tr:c2, trx3, and trone, using regress with the noconstant option.

Third, use regress with (pweight=1/varu3, and show that the default standard errors us-ing pweights differ from those using aweights because the pweights default is to compute robust standard errors.

Reference no: EM131257045

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