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RE: st: RE: Hausman Test Problems


From   "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   RE: st: RE: Hausman Test Problems
Date   Mon, 2 May 2011 10:45:52 +0100

John, Muhammad,

The test of fixed vs. random effects (also) has an overid test
interpretation.  The FE estimator uses the moment conditions
E(x_it*e_it)=0.  The RE estimator uses, in addition, the moment
conditions E(x_it*u_i)=0.  That's what makes it overidentified and an
overid test possible.

There is a short discussion and some references in the xtoverid help
file.

Cheers,
Mark

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> John Antonakis
> Sent: 02 May 2011 10:11
> To: statalist@hsphsun2.harvard.edu
> Subject: Re: st: RE: Hausman Test Problems
> 
> You don't need to be overidentified to use xtoverid.  The 
> command in fact tests a constraint that is made, which nests 
> the random and fixed-effects models (i.e., the constraint 
> that is made to the random effects model is that level 2 
> regressors do not correate with uj).
> 
> To get a better handle on what types of constraints are made 
> in these types of models see:
> 
> Bollen, K. A., & Brand, J. E. (2010). A General Panel Model 
> with Random and Fixed Effects A Structural Equations 
> Approach. Social Forces, 89(1), 1-34.
> 
> HTH,
> John.
> 
> __________________________________________
> 
> Prof. John Antonakis
> Faculty of Business and Economics
> Department of Organizational Behavior
> University of Lausanne
> Internef #618
> CH-1015 Lausanne-Dorigny
> Switzerland
> Tel ++41 (0)21 692-3438
> Fax ++41 (0)21 692-3305
> http://www.hec.unil.ch/people/jantonakis
> 
> Associate Editor
> The Leadership Quarterly
> __________________________________________
> 
> 
> On 02.05.2011 10:56, Muhammad Anees wrote:
> > Thanks Eric!
> >
> > It did worked for me. I actually run the regressions without 
> > pretesting it for any overidentification. Can I still follow any 
> > procedure selecting one of the FE and RE using over 
> identified panel 
> > data regressions.
> >
> > On 2 May 2011 12:44, DE SOUZA 
> Eric<eric.de_souza@coleurope.eu>  wrote:
> >> The Hausman test for fixed vs  random is only valid under 
> a strict set of assumptions. These assumptions are clearly 
> not satisfied in your case .
> >> Use -xtoverid-. Download it from ssc: -ssc install 
> xtoverid- and read the help file first.
> >>
> >>
> >> Eric de Souza
> >> College of Europe
> >> Brugge (Bruges), Belgium
> >> http://www.coleurope.eu
> >>
> >>
> >> -----Original Message-----
> >> From: owner-statalist@hsphsun2.harvard.edu 
> >> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> Muhammad 
> >> Anees
> >> Sent: 02 May 2011 06:12
> >> To: statalist@hsphsun2.harvard.edu
> >> Subject: st: Hausman Test Problems
> >>
> >> Dear All!
> >>
> >> I have run a panel data regression and selection of the 
> random effects or fixed effects using Hausman test. I do not 
> know what is the actual problem with my results. Please could 
> someone help. Why the result for my hausman command results 
> in warning message?
> >> the complete results are below:
> >>
> >>
> >> . xtreg priceclose eps bookvalue, fe
> >>
> >> Fixed-effects (within) regression               Number of 
> obs      =       850
> >> Group variable: id                              Number of 
> groups   =       170
> >>
> >> R-sq:  within  = 0.1160                         Obs per 
> group: min =         5
> >> between = 0.5266                                        
> avg =       5.0
> >> overall = 0.4645                                        
> max =         5
> >>
> >> F(2,678)           =     44.48
> >> corr(u_i, Xb)  = 0.4836                         Prob>  F   
>         =    0.0000
> >>
> >>
> >> priceclose       Coef.   Std. Err.      t    P>t     [95% 
> Conf. Interval]
> >>
> >> eps    .7770481   .1966364     3.95   0.000     .3909585   
>  1.163138
> >> bookvalue    .8653121   .1577343     5.49   0.000     
> .5556057    1.175018
> >> _cons    1.001173   .1176642     8.51   0.000     .7701434 
>    1.232204
> >>
> >> sigma_u   3.5662704
> >> sigma_e   1.5953308
> >> rho   .83325562   (fraction of variance due to u_i)
> >>
> >> F test that all u_i=0:     F(169, 678) =    17.34          
>   Prob>  F = 0.0000
> >>
> >> .
> >> . estimates store fe
> >>
> >> .
> >> . xtreg priceclose eps bookvalue, re
> >>
> >> Random-effects GLS regression                   Number of 
> obs      =       850
> >> Group variable: id                              Number of 
> groups   =       170
> >>
> >> R-sq:  within  = 0.1159                         Obs per 
> group: min =         5
> >> between = 0.5186                                        
> avg =       5.0
> >> overall = 0.4593                                        
> max =         5
> >>
> >> Random effects u_i ~ Gaussian                   Wald 
> chi2(2)       =    297.79
> >> corr(u_i, X)       = 0 (assumed)                Prob>  
> chi2        =    0.0000
> >>
> >>
> >> priceclose       Coef.   Std. Err.      z    P>z     [95% 
> Conf. Interval]
> >>
> >> eps    1.113035   .2084971     5.34   0.000     .7043883   
>  1.521682
> >> bookvalue    1.394302   .1196459    11.65   0.000     
> 1.159801    1.628804
> >> _cons    .5629992   .2070207     2.72   0.007     .1572462 
>    .9687522
> >>
> >> sigma_u   2.1242726
> >> sigma_e   1.5953308
> >> rho   .63938518   (fraction of variance due to u_i)
> >>
> >>
> >> .
> >> . estimates store re
> >>
> >> .
> >> . hausman fe re
> >>
> >> ---- Coefficients ----
> >> (b)          (B)            (b-B)     sqrt(diag(V_b-V_B))
> >> fe           re         Difference          S.E.
> >>
> >> eps     .7770481     1.113035       -.3359869               .
> >> bookvalue     .8653121     1.394302       -.5289903         .102786
> >>
> >> b = consistent under Ho and Ha; obtained from xtreg B = 
> inconsistent 
> >> under Ha, efficient under Ho; obtained from xtreg
> >>
> >> Test:  Ho:  difference in coefficients not systematic
> >>
> >> chi2(2) = (b-B)'[(V_b-V_B)^(-1)](b-B)
> >> =   -15.59    chi2<0 ==>  model fitted on these
> >> data fails to meet the asymptotic
> >> assumptions of the Hausman test;
> >> see suest for a generalized test
> >>
> >>
> >> --
> >> Muhammad Anees
> >> MSc in Economics
> >> The University of Sheffield
> >> United Kingdom
> >> *
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> >>
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> >
> >
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