st: RE: RE: hausman, augmented test from Vince's code and xtoverid after xtivreg

[ESTHER GOYA CARRILLO <egoya@ub.edu>]

Professor Mark,

Thanks a lot for your answer.
Perhaps behaviour is consistent, but a little bit easy to misunderstand. However, as you mentioned, help file is very useful. 

Then, how do I compare FE vs RE after "xtivreg" if chi-square in Hausman test is negative or it has a "V_b- V_B not positive defined"?
Should I follow [R] hausman (in favour of RE) or Vince's code (in favour of FE) is more appropriate?

Thanks again,
Esther

________________________________________
De: owner-statalist@hsphsun2.harvard.edu [owner-statalist@hsphsun2.harvard.edu] en nom de Schaffer, Mark E [M.E.Schaffer@hw.ac.uk]
Enviat el: dimarts, 31 / juliol / 2012 00:24
Per a: statalist@hsphsun2.harvard.edu
Tema: st: RE: hausman, augmented test from Vince's code and xtoverid after xtivreg

Esther,

After xtivreg RE or FE estimation, and after xtivreg2 FE estimation, xtoverid reports an overid statistic relating to the endogenous variables being instrumented.  It isn't reporting an FE vs. RE test.

After xtreg RE estimation, xtoverid reports a Hausman or Hausman-type test of FE vs. RE.  This can be interpreted as a kind of overidentification test relating to the (exogenous) regressors, as the help file explains.

I agree, this behaviour by xtoverid is not entirely consistent....

HTH,
Mark (xtoverid author)


From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of ESTHER GOYA CARRILLO
Sent: 30 July 2012 11:41
To: statalist@hsphsun2.harvard.edu
Subject: st: hausman, augmented test from Vince's code and xtoverid after xtivreg

Hi everyone,

I am a PhD student working on my thesis now. I am struggling with a "dilemma" and I really appreciate if someone could help me.
I am estimating a FE and RE model with Instrumental variable using panel data. So, I use xtivreg, fe and xtivreg, re commands. I want to compare both models and choose the correct one. Hi have two questions:

1) If I use "hausman" chi-square is negative. Then, and according to the [R] hausman, "we might interpret this as strong evidence that we cannot reject the null hypothesis". So, following this interpretation, I should work with RE (due to that we can assume that the regressors are uncorrelated with the group specific error (ui)).

On the other hand, I have read Vince's post about hausman test (http://www.stata.com/statalist/archive/2005-08/msg00760.html). I have applied his code (many thanks!) to compare FE vs RE after xtivreg (I guess I can used this code, not only for xtreg but also for xtivreg). The results are below. P-value=0, so I reject the null hypothesis. Thus FE are preferred, is this correct?

Then, my first question is: which is the correct option?


2) I also consider "xtoverid" option. I have read Professor Mark's post (http://www.stata.com/statalist/archive/2007-11/msg00721.html) and the online help for "xtoverid" command. Regarding to the post, Professor Mark said "the Sargan-Hansen statistic reported by xtoverid after xtivreg or xtreg is, in fact, an FE vs RE test". However, in the online help is written "A test for fixed vs. random effects is also a test of overidentifying restrictions, and xtoverid will report this after a standard panel data estimation with xtreg, re". But, here is not consider "xtivreg" case...

In order to check it, I use "xtoverid" after "xtreg, re" and the output of stata is in fact a FE vs RE test (results below). But I use "xtoverid" after "xtivreg, re" and output of stata does not suggest that it is a FE vs RE test like in the previous case...  Moreover, p-value = 0.4112, so I cannot reject the null hypothesis. If this was a FE vs RE test, the conclusion would be that RE model is preferred (it is consistent and more efficient than FE). This is opposite to the result obtained from Vince's code...
Besides, I can perform "xtoverid" after "xtivreg, FE" (results below). In this case, p-value=0.3488... And I don't know how to interpret this result...which is the null hypothesis here?

So, my second question is: can I use "xtoverid" after xtivreg to do an FE vs RE test? If the answer is yes, with which option: xtivreg, RE or xtivreg, FE?


Given all of these, I don't know if it's better use Vince's code or hausman test or "xtoverid"....after my "xtivreg" estimation, because the conclusions are completely different...

I would be really grateful if someone could help me in any of these questions.
Many thanks in advance,
Esther

**** RESULTS  FROM VINCE'S CODE ****
. test

( 1) = 0
( 2)  mean2 - diff2 = 0
( 3)  mean3 - diff3 = 0
( 4)  mean4 - diff4 = 0
( 5)  mean5 - diff5 = 0
       Constraint 1 dropped

           chi2(  4) =  553.93
         Prob > chi2 =    0.0000

**** RESULTS  FROM XTOVERID  WITH XTREG ****
. quietly xtreg lny_l medium large grupo intra1 inter1_p lnRDs_l lnCFs_l, re
. xtoverid, robust

Test of overidentifying restrictions: fixed vs random effects
Cross-section time-series model: xtreg re  robust
Sargan-Hansen statistic 1260.567  Chi-sq(7)   P-value = 0.0000

**** RESULTS  FROM XTOVERID  WITH XTIVREG ****
* xtoverid after xtivreg, re:
. quietly xtivreg lny_l medium large grupo intra1 inter1_p (lnRDs_l lnCFs_l= lag1RD lag2RD lag1CF lag2CF), re
. xtoverid, robust

Test of overidentifying restrictions:
Cross-section time-series model: xtivreg g2sls  robust
Sargan-Hansen statistic   1.777  Chi-sq(2)    P-value = 0.4112

* xtoverid after xtivreg, fe:
. quietly xtivreg lny_l medium large grupo intra1 inter1_p (lnRDs_l lnCFs_l= lag1RD lag2RD lag1CF lag2CF), fe
. xtoverid, robust

Test of overidentifying restrictions:
Cross-section time-series model: xtivreg fe  robust
Sargan-Hansen statistic   2.107  Chi-sq(2)    P-value = 0.3488


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