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st: Breusch and Pagan Lagrangian multiplier test for random effects
From
Caliph Omar Moumin <[email protected]>
To
"[email protected]" <[email protected]>
Subject
st: Breusch and Pagan Lagrangian multiplier test for random effects
Date
Sat, 5 May 2012 07:22:07 -0700 (PDT)
Dear all
For the past two weeks i spent to decide whether i apply fixed effect or random effect model in my strongly unbalanced panel data. But I couldn't decide it.
These are the tests i applied so could you please give a minute and advice me what to apply? I understood the my hausman test impllies that i can apply either fixed or random effect modells. Is that so? If that is correct then i choose to apply the random effect model becuase of some time in-variant involved.
What about Breusch-Pagan Lagrange multiplier (LM) test? I have no clue as to how interperate this test? Could any help me?
xtdescribe
id: 6, 9, ..., 809378 n = 14503
nadmission1: 1, 2, ..., 16 T = 16
Delta(nadmission1) = 1 unit
Span(nadmission1) = 16 periods
(id*nadmission1 uniquely identifies each observation)
Distribution of T_i: min 5% 25% 50% 75% 95% max
1 1 1 1 1 2 16
Freq. Percent Cum. | Pattern
---------------------------+------------------
13302 91.72 91.72 | 1...............
797 5.50 97.21 | 11..............
160 1.10 98.32 | 111.............
97 0.67 98.99 | 1111............
58 0.40 99.39 | 11111...........
31 0.21 99.60 | 111111..........
29 0.20 99.80 | 1111111.........
12 0.08 99.88 | 11111111........
8 0.06 99.94 | 111111111.......
9 0.06 100.00 | (other patterns)
---------------------------+------------------
14503 100.00 | XXXXXXXXXXXXXXXX
I want to compare between this two groups
xttab group;
Overall Between Within
group | Freq. Percent Freq. Percent Percent
----------+-----------------------------------------------------
alcohol | 275 1.64 191 1.32 100.00
nonalcoh | 16443 98.36 14312 98.68 100.00
----------+-----------------------------------------------------
Total | 16718 100.00 14503 100.00 100.00
(n = 14503)
.quietly xtreg cost duration sex age group, fe;
. estimates store fixed;
. quietly xtreg cost duration sex age group, re;
. estimates store random;
hausman fixed random;
---- Coefficients ----
| (b) (B) (b-B) sqrt(diag(V_b-V_B))
| fixed random Difference S.E.
-------------+----------------------------------------------------------------
duration | 874.4642 944.5754 -70.11117 84.24204
------------------------------------------------------------------------------
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(1) = (b-B)'[(V_b-V_B)^(-1)](b-B)
= 0.69
Prob>chi2 = 0.4053
Breusch-Pagan Lagrange multiplier (LM)test is performed as follows
xtreg cost duration, re;
xttest0;
Breusch and Pagan Lagrangian multiplier test for random effects
cost[id,t] = Xb + u[id] + e[id,t]
Estimated results:
| Var sd = sqrt(Var)
---------+-----------------------------
cost | 2.27e+09 47647.13
e | 6.78e+08 26038.66
u | 1.66e+09 40752.23
Test: Var(u) = 0
chi2(1) = 59.40
Prob > chi2 = 0.0000
A test for heteroskedasticity is performed which shows presence
xtreg cost duration, fe
xttest3
Modified Wald test for groupwise heteroskedasticity
in fixed effect regression model
H0: sigma(i)^2 = sigma^2 for all i
chi2 (14503) = 2.1e+36
Prob>chi2 = 0.0000
Kind Regards,
Moumin
Email: [email protected]
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