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


From   Christina SAKALI <christina.sakali@googlemail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: RE: Question about Hausman test results: V_b - V_B not positive definite
Date   Sun, 15 May 2011 18:19:10 +0300

Thank you for the information. I downloaded the file you suggested
(xtoverid) and it was installed on my PC, however when I tried to open
it (with adobe photoshop) it wouldn't open. Can you please provide
some more info on what this file is and how I can use it?

Thanx a lot!

On 14 May 2011 14:10, DE SOUZA Eric <eric.de_souza@coleurope.eu> wrote:
> The standard Hausman test for fixed vs random effects is valid under very strict conditions (see Wooldridge's textbook, for instance). Clearly these conditions are not satisfied in your case.
>
> Download the user written routine -xtoverid- and use that instead:
> -ssc install xtoverid-
> 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 Christina SAKALI
> Sent: 14 May 2011 12:21
> To: statalist
> Subject: st: Question about Hausman test results: V_b - V_B not positive definite
>
> Hello all,
>
> I am running a panel regression with 121 observations. My question regards the choice of fixed effects versus random effects specification.
>
> 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,
>
> Christina
>
> . 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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