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From |
"Austin Nichols" <austinnichols@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: unexpected error message after Hausman test for random vs. fixed effects |

Date |
Mon, 13 Oct 2008 08:48:25 -0400 |

Alfred Stiglbauer <Alfred.Stiglbauer@oenb.at>: See -help whatsnew- under update 25feb2008: 20. xtreg, fe now uses vce(cluster id) when vce(robust) is specified, in light of the new results in Stock and Watson, "Heteroskedasticity-robust standard errors for fixed-effects panel-data regression," Econometrica 76 (2008): 155-174. And see -xtoverid- on SSC for a Hausman-style test in this setting, as described in its help file: " A test of fixed vs. random effects can also be seen as a test of overidentifying restrictions. The fixed effects estimator uses the orthogonality conditions that the regressors are uncorrelated with the idiosyncratic error e_it, i.e., E(X_it*e_it)=0. The random effects estimator uses the additional orthogonality conditions that the regressors are uncorrelated with the group-specific error u_i (the "random effect"), i.e., E(X_it*u_i)=0. These additional orthogonality conditions are overidentifying restrictions. The test is implemented by xtoverid using the artificial regression approach described by Arellano (1993) and Wooldridge (2002, pp. 290-91), in which a random effects equation is reestimated augmented with additional variables consisting of the original regressors transformed into deviations-from-mean form. The test statistic is a Wald test of the significance of these additional regressors. A large-sample chi-squared test statistic is reported with no degrees-of-freedom corrections. Under conditional homoskedasticity, this test statistic is asymptotically equivalent to the usual Hausman fixed-vs-random effects test; with a balanced panel, the artificial regression and Hausman test statistics are numerically equal. See Arellano (1993) for an exact statement and the example below for a demonstration. Unlike the Hausman version, the test reported by xtoverid extends straightforwardly to heteroskedastic- and cluster-robust versions, and is guaranteed always to generate a nonnegative test statistic. " On Mon, Oct 13, 2008 at 8:34 AM, Alfred Stiglbauer <Alfred.Stiglbauer@oenb.at> wrote: > Dear all, > > I want to conduct some fairly standard Hausman tests (for various specifications) after -xtreg- testing whether a random effects model is appropriate as opposed to fixed effects. > > When the program should perform the first of these tests this results in an error message: > > hausman cannot be used with clustered or p-weighted data > r(198); > > I do not understand this. I've neither data with weights nor is a cluster option involved anywhere. (Additionally, the data aren't based on a survey and I have not used any command to instruct Stata to treat them in such a way.) > > The regression commands include the "robust" option in both regression models (i. e. xtreg[...], fe and xtreg[...], re). Interestingly, the Hausman test is performed when I do NOT use this option. > > Any ideas or suggestions? Thanks for help! * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**References**:**st: unexpected error message after Hausman test for random vs. fixed effects***From:*"Alfred Stiglbauer" <Alfred.Stiglbauer@oenb.at>

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