The cluster robust variance estimator (CRVE) relies on the number of clusters being large. A shorthand "rule of 42'' has emerged, but we show that unbalanced clusters invalidate it. Monte Carlo evidence suggests that rejection frequencies are higher for datasets with 50 clusters proportional to...

The cluster robust variance estimator (CRVE) relies on the number of clusters being large. The precise meaning of `large' is ambiguous, but a shorthand `rule of 42' has emerged in the literature. We show that this rule depends crucially on the assumption of equal-sized clusters. Monte Carlo...

Many empirical projects involve estimation with clustered data. While estimation is straightforward, reliable inference can be challenging. Past research has suggested a number of bootstrap procedures when there are few clusters. I demonstrate, using Monte Carlo experiments, that these bootstrap...

Many empirical projects are well suited to incorporating a linear difference-in- differences research design. While estimation is straightforward, reliable inference can be a challenge. Past research has not only demonstrated that estimated standard errors are biased dramatically downwards in...

SUMMARY We calculate, by simulations, numerical asymptotic distribution functions of likelihood ratio tests for fractional unit roots and cointegration rank. Because these distributions depend on a real‐valued parameter b which must be estimated, simple tabulation is not feasible. Partly owing...

Offering a unifying theoretical perspective not readily available in any other text, this innovative guide to econometrics uses simple geometrical arguments to develop students' intuitive understanding of basic and advanced topics, emphasizing throughout the practical applications of modern...

We consider several issues related to Durbin-Wu-Hausman tests; that is, tests based on the comparison of two sets of parameter estimates. We first review a number of results about these tests in linear regression models, discuss what determines their power, and propose a simple way to improve...