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st: Re: xthaus


From   baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: Re: xthaus
Date   Tue, 20 Aug 2002 08:45:33 -0400

--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

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