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st: Question about Hausman test results: V_b - V_B not positive definite

From   Christina SAKALI <>
To   statalist <>
Subject   st: Question about Hausman test results: V_b - V_B not positive definite
Date   Sat, 14 May 2011 13:20:32 +0300

Hello all,

I am running a panel regression with 121 observations. My question
regards the choice of fixed effects versus random effects

I carried out a hausman test and the results suggest that I cannot
reject the Ho (Prob > 0.05) which I believe it means that the random
effects model is preferred for my data.

However I also get the message that the variance of the coefficient
difference is not positive definite.

Can someone explain to me what this means and whether I can trust the
Hausman test results to be valid. Should I choose the random effects
specification as more appropriate for my data?

(Results from hausman test are provided below).

Kind regards,


. hausman
You used the old syntax of hausman. Click here to learn about the new syntax.

                ---- Coefficients ----
            |      (b)          (B)            (b-B)     sqrt(diag(V_b-V_B))
            |   Consistent   Efficient      Difference          S.E.
         gg |    1.130961     1.075676        .0552858               .
      trade |    1.544293     .4932033         1.05109        .4425236
        sec |    3.217286     3.053046        .1642406               .
       tert |    4.319199     3.989446         .329753               .
      trans |    5.480038     5.574542       -.0945033               .
                          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(5) = (b-B)'[(V_b-V_B)^(-1)](b-B)
                         =        5.64
               Prob>chi2 =      0.3427
               (V_b-V_B is not positive definite)


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