Hello everyone,
Just a little confused, I currently have a panel data and I am choosing between using random effects or fixed effects. When I run my regression first without an i.Year variable I find through a Hausman test that FE is more suited for this regression. However I then use testparm in order to see if I need to include a i.Year variable and the result of Prob is less than 0.05 which indicates I should. Once I include the i.year variable in my regression the value of the Hausman test changes completely and goes to 0.9457 from 0.0013 (which was the value of the Hausman test before including the i.Year variable). This new Hausman would indicate that a random effects regression might be more suited. However my questions are;
1. Why does the value of the Hausman change so much?
2. Is it more logical to do the Hausman test including the i.Year variable or without it?
Many thanks
Pepito
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