[R] Newey West HAC for pooled cross-section data

[Achim Zeileis]

On Tue, 26 Mar 2013, SHISHIR MATHUR wrote:

> Hello:
> My dataset set contains several thousand rows of data, with each row
> containing information for a house. The variables include the sale price of
> the house, the quarter and year of sale, the attributes of the house, and
> the attributes of the neighborhood and the city in which the house is
> located. The data is for a 10-year period. No house is repeated in the
> dataset. In summary, the dataset can be termed pooled cross-section data.
>
> My question: Can I estimate Newey-West HAC standard errors for a model that
> estimates the effect of various independent variables on the sale price of
> the house?  My understanding is that Newey-West can be used for time series
> and panel data. However, I am not sure whether it can be used for pooled
> cross-section data.  If yes, can you refer me to a specific source, such as
> a paper or a book?

The result of your aggregation is a cross-section data set. Thus, there 
should be no correlation between the different observations - or in other 
terms, the ordering of your observations is completely arbitrary.

Consequently, there may be heteroskedasticity but not autocorrelation. So 
you may use HC standard errors but HAC should not be necessary. (Using HAC 
standard errors will still be consistent but less efficient.)


> -- 
> Best,
> Shish
>
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>
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