A note on the Helmert transformation

Ryan Decker
Here I will explain how the Stata helm command (by Inessa Love) transforms panel data. I
also provide a proof that time-demeaning the data prior to the Helmert transformation has no
effect on the final result.
Consider a panel dataset with variable
where is the group variable (e.g., state) and is the

time variable,
. Define
, the mean of
over time for state .
Define
as the Helmert-transformed version of . Then

Note that the Helmert observation for time t is the original observation for time t minus the mean
of observations time
through T; that is, the mean of all future observations. Observe that
this expression gives larger weight to observations closer to the beginning of the time series. This
is the case so that observations have equal variance.
Consider an exercise in which we time-demean the data before applying the Helmert
transformation (as is suggested by the helm help file). Then define
, the timedemeaned version of . We will apply the Helmert transformation to rather than to ; we
will call the result
. Then the formula for the transformed data is:

(
(

(
(

))

)
) )

That is, applying the Helmert transformation to raw data produces the same result as applying the
Helmert transformation to time-demeaned data.