Why wouldn't a standard Hausman test work here?
On Thu, Sep 24, 2009 at 4:46 AM, Miriam Wüst <[email protected]> wrote:
> Hi
>
> I am trying to implement a Hausman test to test my FE model against a model allowing for more unrestricted covariances. I estimate my FE model with xtreg and estimate my alternative (unrestricted) model with the nl feature (I match sample and theoretical covariances by setting up a number of restrictions on the theoretical covariance matrix). The resulting model has more parameters than the FE model, which assumes some of the covariances to be 0 (restricted). Do I simply add those restricted parameters to the FE parameter vector by adding 0's? Am I making any sense to you - please help :)
>
> Miriam
>
>
>
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