What is Hausman test used for?
Hausman. The test evaluates the consistency of an estimator when compared to an alternative, less efficient estimator which is already known to be consistent. It helps one evaluate if a statistical model corresponds to the data.
What is xttest0?
xttest0, for use after xtreg, re, presents the Breusch and Pagan (1980) Lagrange multiplier test for random effects, a test that Var(νi) = 0. Syntax for predict. For all but the population-averaged model.
What does i year mean in Stata?
In this case “country” represents the entities or panels (i) and “year” represents the time variable (t). If, for example, one country does not have data for one year then the data is unbalanced.
How do you interpret Hausman results?
Test Results Interpreting the result from a Hausman test is fairly straightforward: if the p-value is small (less than 0.05), reject the null hypothesis. The problem comes with the fact that many versions of the test — with different hypothesis and possible conclusions — exist.
What pooled OLS?
According to Wooldridge (2010), pooled OLS is employed when you select a different sample for each year/month/period of the panel data. Fixed effects or random effects are employed when you are going to observe the same sample of individuals/countries/states/cities/etc.
What is Xtreg Stata?
The Stata command to run fixed/random effecst is xtreg. In this case “country” represents the entities or panels (i) and “year” represents the time variable (t). The note “(strongly balanced)” refers to the fact that all countries have data for all years.
What is Areg Stata?
areg fits a linear regression absorbing one categorical factor. areg is designed for datasets with many groups, but not a number of groups that increases with the sample size. See the xtreg, fe command in [XT] xtreg for an estimator that handles the case in which the number of groups increases with the sample size.
What does Sigmamore mean?
help hausman- gives you the following explanation of this option: “sigmamore allows you to specify that the two covariance matrices used in the test be based on a common estimate of disturbance variance (sigma2); the variance from the more (fully) efficient estimator.
Is the Hausman command relevant for Stata 6?
Note: This FAQ is for users of Stata 5. It is not relevant for Stata 6, which includes the hausman command to perform the Hausman specification test. Stata 5: How do I test endogeneity? How do I perform a Durbin–Wu–Hausman test?
Which is a general implementation of the Hausman specification test?
hausman is a general implementation of Hausman’s (1978) specification test, which compares an estimator . 1 that is known to be consistent with an estimator b. 2 that is efficient under the assumption being tested.
What is the null hypothesis of the Hausman test?
hausman is a general implementation of Hausman’s (1978) specification test, which compares an estimator \ 1that is known to be consistent with an estimator b\ 2that is efficient under the assumption being tested. The null hypothesis is that the estimator b\ 2is indeed an efficient (and consistent) estimator of the true parameters.
Which is better a re or a Hausman test?
Code the p-value gets > 0.05. In this case RE would be better.. – by the way, with non-default standard errors, -hausman- is unfeasible, nor adopting cluster/robust standard errors after -hausman- test is correct. Carlo, many thanks for your helpful comments!