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


From   "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: RE: RE: hausman, augmented test from Vince's code and xtoverid after xtivreg
Date   Wed, 1 Aug 2012 17:33:38 +0100

Esther,

Can you clarify what your xtivreg RE vs. FE will test?  The RE specification probably has two kinds of additional orthogonality conditions that the FE spec doesn't use.

The first would be the additional orthogonality conditions that the RE estimator uses in the basic xtreg setting (no endogenous regressors), i.e., the assumption that the exogenous regressors are orthogonal to u_i (as well as to e_it, which the FE estimator also uses).

The second would be additional orthogonality conditions that the RE estimator uses that are associated with the excluded instruments.

Which do you want to test?

--Mark


> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-
> statalist@hsphsun2.harvard.edu] On Behalf Of ESTHER GOYA CARRILLO
> Sent: 31 July 2012 09:31
> To: statalist@hsphsun2.harvard.edu
> Subject: st: RE: RE: hausman, augmented test from Vince's code and xtoverid
> after xtivreg
> 
> Professor Mark,
> 
> Thanks a lot for your answer.
> Perhaps behaviour is consistent, but a little bit easy to misunderstand.
> However, as you mentioned, help file is very useful.
> 
> Then, how do I compare FE vs RE after "xtivreg" if chi-square in Hausman test
> is negative or it has a "V_b- V_B not positive defined"?
> Should I follow [R] hausman (in favour of RE) or Vince's code (in favour of FE)
> is more appropriate?
> 
> Thanks again,
> Esther
> 
> ________________________________________
> De: owner-statalist@hsphsun2.harvard.edu [owner-
> statalist@hsphsun2.harvard.edu] en nom de Schaffer, Mark E
> [M.E.Schaffer@hw.ac.uk] Enviat el: dimarts, 31 / juliol / 2012 00:24 Per a:
> statalist@hsphsun2.harvard.edu
> Tema: st: RE: hausman, augmented test from Vince's code and xtoverid after
> xtivreg
> 
> Esther,
> 
> After xtivreg RE or FE estimation, and after xtivreg2 FE estimation, xtoverid
> reports an overid statistic relating to the endogenous variables being
> instrumented.  It isn't reporting an FE vs. RE test.
> 
> After xtreg RE estimation, xtoverid reports a Hausman or Hausman-type test
> of FE vs. RE.  This can be interpreted as a kind of overidentification test
> relating to the (exogenous) regressors, as the help file explains.
> 
> I agree, this behaviour by xtoverid is not entirely consistent....
> 
> HTH,
> Mark (xtoverid author)
> 
> 
> From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-
> statalist@hsphsun2.harvard.edu] On Behalf Of ESTHER GOYA CARRILLO
> Sent: 30 July 2012 11:41
> To: statalist@hsphsun2.harvard.edu
> Subject: st: hausman, augmented test from Vince's code and xtoverid after
> xtivreg
> 
> 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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Heriot-Watt University is the Sunday Times
Scottish University of the Year 2011-2012

We invite research leaders and ambitious early career researchers to 
join us in leading and driving research in key inter-disciplinary themes. 
Please see www.hw.ac.uk/researchleaders for further information and how
to apply.

Heriot-Watt University is a Scottish charity
registered under charity number SC000278.


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