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st: hausman, augmented test from Vince's code and xtoverid after xtivreg


From   ESTHER GOYA CARRILLO <egoya@ub.edu>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   st: hausman, augmented test from Vince's code and xtoverid after xtivreg
Date   Mon, 30 Jul 2012 10:41:10 +0000

Hi everyone,

 

I am a PhD student working on my thesis now. I am struggling with a “dilemma” and I really appreciate if someone could help me.

I am estimating a FE and RE model with Instrumental variable using panel data. So, I use xtivreg, fe and xtivreg, re commands. I want to compare both models and choose the correct one. Hi have two questions:

 

1) If I use “hausman” chi-square is negative. Then, and according to the [R] hausman, “we might interpret this as strong evidence that we cannot reject the null hypothesis”. So, following this interpretation, I should work with RE (due to that we can assume that the regressors are uncorrelated with the group specific error (ui)).

 

On the other hand, I have read Vince’s post about hausman test (http://www.stata.com/statalist/archive/2005-08/msg00760.html). I have applied his code (many thanks!) to compare FE vs RE after xtivreg (I guess I can used this code, not only for xtreg but also for xtivreg). The results are below. P-value=0, so I reject the null hypothesis. Thus FE are preferred, is this correct?

 

Then, my first question is: which is the correct option?

 

 

2) I also consider “xtoverid” option. I have read Professor Mark’s post (http://www.stata.com/statalist/archive/2007-11/msg00721.html) and the online help for “xtoverid” command. Regarding to the post, Professor Mark said “the Sargan-Hansen statistic reported by xtoverid after xtivreg or xtreg is, in fact, an FE vs RE test”. However, in the online help is written “A test for fixed vs. random effects is also a test of overidentifying restrictions, and xtoverid will report this after a standard panel data estimation with xtreg, re”. But, here is not consider “xtivreg” case…

 

In order to check it, I use “xtoverid” after “xtreg, re” and the output of stata is in fact a FE vs RE test (results below). But I use “xtoverid” after “xtivreg, re” and output of stata does not suggest that it is a FE vs RE test like in the previous case...  Moreover, p-value = 0.4112, so I cannot reject the null hypothesis. If this was a FE vs RE test, the conclusion would be that RE model is preferred (it is consistent and more efficient than FE). This is opposite to the result obtained from Vince’s code…

Besides, I can perform “xtoverid” after “xtivreg, FE” (results below). In this case, p-value=0.3488… And I don’t know how to interpret this result…which is the null hypothesis here?

 

So, my second question is: can I use “xtoverid” after xtivreg to do an FE vs RE test? If the answer is yes, with which option: xtivreg, RE or xtivreg, FE?

 

 

Given all of these, I don’t know if it’s better use Vince’s code or hausman test or “xtoverid”….after my “xtivreg” estimation, because the conclusions are completely different…

 

I would be really grateful if someone could help me in any of these questions.

Many thanks in advance,

Esther

 

**** RESULTS  FROM VINCE’S CODE ****

. test

 

( 1) = 0

( 2)  mean2 - diff2 = 0

( 3)  mean3 - diff3 = 0

( 4)  mean4 - diff4 = 0

( 5)  mean5 - diff5 = 0

       Constraint 1 dropped

 

           chi2(  4) =  553.93

         Prob > chi2 =    0.0000

 

**** RESULTS  FROM XTOVERID  WITH XTREG ****

. quietly xtreg lny_l medium large grupo intra1 inter1_p lnRDs_l lnCFs_l, re

. xtoverid, robust

 

Test of overidentifying restrictions: fixed vs random effects

Cross-section time-series model: xtreg re  robust

Sargan-Hansen statistic 1260.567  Chi-sq(7)   P-value = 0.0000

 

**** RESULTS  FROM XTOVERID  WITH XTIVREG ****

* xtoverid after xtivreg, re:

. quietly xtivreg lny_l medium large grupo intra1 inter1_p (lnRDs_l lnCFs_l= lag1RD lag2RD lag1CF lag2CF), re

. xtoverid, robust

 

Test of overidentifying restrictions:

Cross-section time-series model: xtivreg g2sls  robust

Sargan-Hansen statistic   1.777  Chi-sq(2)    P-value = 0.4112

 

* xtoverid after xtivreg, fe:

. quietly xtivreg lny_l medium large grupo intra1 inter1_p (lnRDs_l lnCFs_l= lag1RD lag2RD lag1CF lag2CF), fe

. xtoverid, robust

 

Test of overidentifying restrictions:

Cross-section time-series model: xtivreg fe  robust

Sargan-Hansen statistic   2.107  Chi-sq(2)    P-value = 0.3488



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