[R] Modelling heteroskedasticity in a multilevel model

[Antonio Revilla]

Dear list members,

I am facing a 3-level model, for which my research hypotheses suggest that 
the variance of both level-1 and level-2 residuals may be a function of a 
level-3 variable.

To be a bit more clear: I am fitting a longitudinal model for a panel of 
companies grouped in industries. I suggest that some industry variables may 
create 'unexpected' shocks at especific points in time; such shocks are not 
accounted for by the explanatory variables in the model, so that they will 
presumably increase variance of level-1 residuals. On the other hand, 
industry-level attributes may also affect the relative relative size of 
firm-level permanent effects (represented by level-2 residuals)

Do you know how could I model such a residual structure in R? I have been 
looking at the varfunc command in the nlme package, but I am not sure if 
such a function can perform the kind of analysis I actually need.

Thank you very much in advance,

Antonio

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