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st: RE: Question about Hausman test results: V_b - V_B not positive definite
From
DE SOUZA Eric <[email protected]>
To
"[email protected]" <[email protected]>
Subject
st: RE: Question about Hausman test results: V_b - V_B not positive definite
Date
Sat, 14 May 2011 13:10:11 +0200
The standard Hausman test for fixed vs random effects is valid under very strict conditions (see Wooldridge's textbook, for instance). Clearly these conditions are not satisfied in your case.
Download the user written routine -xtoverid- and use that instead:
-ssc install xtoverid-
Read the help file first.
Eric de Souza
College of Europe
Brugge (Bruges), Belgium
http://www.coleurope.eu
-----Original Message-----
From: [email protected] [mailto:[email protected]] On Behalf Of Christina SAKALI
Sent: 14 May 2011 12:21
To: statalist
Subject: st: Question about Hausman test results: V_b - V_B not positive definite
Hello all,
I am running a panel regression with 121 observations. My question regards the choice of fixed effects versus random effects specification.
I carried out a hausman test and the results suggest that I cannot reject the Ho (Prob > 0.05) which I believe it means that the random effects model is preferred for my data.
However I also get the message that the variance of the coefficient difference is not positive definite.
Can someone explain to me what this means and whether I can trust the Hausman test results to be valid. Should I choose the random effects specification as more appropriate for my data?
(Results from hausman test are provided below).
Kind regards,
Christina
. hausman
You used the old syntax of hausman. Click here to learn about the new syntax.
---- Coefficients ----
| (b) (B) (b-B) sqrt(diag(V_b-V_B))
| Consistent Efficient Difference S.E.
-------------+----------------
------------------------------------------------
gg | 1.130961 1.075676 .0552858 .
trade | 1.544293 .4932033 1.05109 .4425236
sec | 3.217286 3.053046 .1642406 .
tert | 4.319199 3.989446 .329753 .
trans | 5.480038 5.574542 -.0945033 .
------------------------------------------------------------------------------
b = consistent under Ho and Ha; obtained from xtreg
B = inconsistent under Ha, efficient under Ho; obtained from xtreg
Test: Ho: difference in coefficients not systematic
chi2(5) = (b-B)'[(V_b-V_B)^(-1)](b-B)
= 5.64
Prob>chi2 = 0.3427
(V_b-V_B is not positive definite)
.
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