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Correlation bias correction in two‐way fixed‐effects linear regression
Author(s) -
Gaure Simen
Publication year - 2014
Publication title -
stat
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.61
H-Index - 18
ISSN - 2049-1573
DOI - 10.1002/sta4.68
Subject(s) - ordinary least squares , covariance , fixed effects model , mathematics , statistics , correlation , regression , linear regression , econometrics , panel data , geometry
When doing two‐way fixed‐effects ordinary least squares estimations, both the variances and covariance of the fixed effects are biased. A formula for a bias correction is known, but in large datasets, it involves inverses of impractically large matrices. We detail how to compute the bias correction in this case. Copyright © 2014 John Wiley & Sons, Ltd.