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st: Hausman test, rank of the differenced variance matrix not equal to the number of coefficients


From   Massimiliano Sassone <massimilianosassone@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: Hausman test, rank of the differenced variance matrix not equal to the number of coefficients
Date   Thu, 11 Apr 2013 18:29:25 +0800

Dear all,

I am trying to understand which method between fixed and random
effects is more appropriate in my case. I am using Stata 11 to analyze
a panel dataset composed of 279 observations, derived from 31 regions
over a 9-year period.

If I run the Hausman test the following note appears: "the rank of the
differenced variance matrix (8) does not equal the number of
coefficients being tested (9); be sure this is what you expect, or
there may be problems computing the test.  Examine the output of your
estimators for anything unexpected and possibly consider scaling your
variables so that the coefficients are on a similar scale."

I tried to find an explanation for this note, and I could see this
topic comes up quite often. Unfortunately I couldn't find, my bad, an
explanation for the note and a recommended strategy to solve the
issue.

Could anybody give me a recommendation?
It would be greatly appreciated.

Massimiliano (Max) Sassone
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