st: Re: xthaus

[baum <baum@bc.edu>]

--On Tuesday, August 20, 2002 2:33 -0400 Ron wrote:

> Can someone put me straight on the interpretation of the following Hausman
> test statistic (Fixed v Random Effects).
>
> Test:  Ho:  difference in coefficients not systematic
>
> chi2( 10) = (b-B)'[S^(-1)](b-B),
>
>             S      = (S_fe - S_re)
>                     =   165.97
> Prob>chi2   =     0.0000
>
> I take this to mean that fixed effects are not appropriate, since there
> are quite large discrepancies between Fixed and Random coefficient
> estimates.

Backwards. The null is that the RE estimator is consistent, implying that X 
is orthogonal to u. A rejection implies the RE estimator is inconsistent, 
and that the FE estimator--which is relatively inefficient under the null, 
but consistent under both H0 and HA--is to be preferred.

Kit

*
*   For searches and help try:
*   http://www.stata.com/support/faqs/res/findit.html
*   http://www.stata.com/support/statalist/faq
*   http://www.ats.ucla.edu/stat/stata/