Dear all,
I have been trying to figure out which model to use for my (unbalanced) panel data analysis for some time now and I am getting more and more confused, so I hope some of you can help. I ran Pooled OLS, fixed effect and random effects models and then checked with both -xttest0- and -xtoverid- (I am using clustered robust standard errors). Please find my results below:
So as far as I understand, -xttest0- indicates, that basically there are no random effects. i.e. to go for pooled OLS rather than random effects. -xtoverid- tells me to reject the null hypotheses and go for FE. Yet, I am wondering now which model actually to use? Do the -xttest0- results tell me to go for Pooled OLS rather than both FE AND RE? I have read multiple times, that -xttest0- is also a test to determine the presence of fixed effects, but I don't really understand what to make of this.
Like I said, I am confused and I hope someone can help!
Thanks in advance!
I have been trying to figure out which model to use for my (unbalanced) panel data analysis for some time now and I am getting more and more confused, so I hope some of you can help. I ran Pooled OLS, fixed effect and random effects models and then checked with both -xttest0- and -xtoverid- (I am using clustered robust standard errors). Please find my results below:
Code:
Breusch and Pagan Lagrangian multiplier test for random effects
CAR[panel_ID,t] = Xb + u[panel_ID] + e[panel_ID,t]
Estimated results:
| Var SD = sqrt(Var)
---------+-----------------------------
CAR | .0017767 .0421511
e | .0016862 .041063
u | .0000532 .0072921
Test: Var(u) = 0
chibar2(01) = 0.23
Prob > chibar2 = 0.3169
xtoverid // Rejection of null-hypothesis -> fixed effects
Test of overidentifying restrictions: fixed vs random effects
Cross-section time-series model: xtreg re robust cluster(panel_ID)
Sargan-Hansen statistic 74.807 Chi-sq(29) P-value = 0.0000
Like I said, I am confused and I hope someone can help!
Thanks in advance!
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