st: RE: Robust Hausman test using xtoverid

["Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>]

Ahmed,

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-
> statalist@hsphsun2.harvard.edu] On Behalf Of Abdalla, Ahmed
> Sent: 29 January 2014 18:50
> To: statalist@hsphsun2.harvard.edu
> Subject: st: Robust Hausman test using xtoverid
> 
> Dear statalist
> I am comparing between a Hausman test and a robust Husman type test
> (Wooldridge 2002)
> 
> ***For Hausman test, I run:
> 
>  xtreg ceb wtr, fe
> estimates store fixed
> 
> xtreg ceb wtr, re
> estimates store random
> 
> hausman fixed random  //since I get Prob>chi2 =0.0000 (i.e.significant p values
> , <0.05), I use the fixed effect model.

Note that if you want to guarantee a nonnegative Hausman statistic, you should use either the sigmamore or sigmaless options, e.g.,

hausman fixed random, sigmamore

> ***For Robust Hausman test, I run:
> xtreg ceb wtr, re cluster(firmid)
> xtoverid  // since since I get Prob>chi2 =0.0000 (i.e.significant p values , <0.05),
> I use the fixed effect model.
> 
> 
> Do I apply the xtoverid correctly here?

Yes. 

> Do I have to cluster by firm if I use this robust Hausman type test ?

That's up to you!  The test is as robust as you want it to be.

> Can I run
> the xtoverid without clustering as well ?

Yes.  In fact, if it's a balanced panel, the statistic reported by xtoverid and no cluster or robust is numerically identical to the statistic reported by

hausman fixed random, sigmaless

See the xtoverid help file for an example.

HTH,
Mark

> 
> Thanks
> 
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