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st: RE: issues with xtoverid
From
"Schaffer, Mark E" <[email protected]>
To
"[email protected]" <[email protected]>
Subject
st: RE: issues with xtoverid
Date
Tue, 11 Feb 2014 23:52:25 +0000
Ahmed,
Sorry for the long lag in responding. Answer is below.
> -----Original Message-----
> From: [email protected] [mailto:owner-
> [email protected]] On Behalf Of Abdalla, Ahmed
> Sent: 03 February 2014 13:17
> To: [email protected]
> Subject: st: issues with xtoverid
>
> Hi
> I run a robust Hausman test to see which panel data model is more appropriate
> for my data:
> xtreg ceb wtr, re cluster(firmid)
> xtoverid
>
> I get the error message:
> Error - saved RE estimates are degenerate (sigma_u=0) and equivalent to
> pooled OLS
This is telling you that, indeed, your random effects estimates are not random effects estimates at all. The estimate of sigma_u=0 means that there is no variance in the panel-specific intercepts, i.e., they are all the same intercept, i.e., the model reduces to simple linear regression and the estimates are just OLS.
Why Stata's official xtreg doesn't say this in the output is a good question...
> However, when I run Hausman such as:
> xtreg ceb wtr, fe
> estimates store fixed
>
> xtreg ceb wtr, re
> estimates store random
>
> hausman fixed random,sigmamore
>
> //since I get Prob>chi2 =0.0000 (i.e.significant p values , <0.05), I use the fixed
> effect model.
>
> I don't get any error message !
Because (unlike xtoverid) the hausman command doesn't check the random effects results for the sigma_u=0 issue.
> What is wrong with the robust version ?
Nothing!
HTH,
Mark
>
>
> Thanks
>
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