When regressing the following, a hausman test confirms that fixed effects is preferred to random effects.
Code:
xtreg Y L.X1 L.X2 L.X3, fe
Code:
xtreg Z L.X1 L.X2 L.X3, fe
Change in dependent variable suggests change in estimation method
I'd greatly appreciate any help with this.
When regressing the following, a hausman test confirms that fixed effects is preferred to random effects.
However when I change the dependent variable, as below, but keep the same iv's, a hausman test indicates that random effects is preferred.
Theoretically, the individual effects should be correlated with the iv's in both cases so I don't understand why the second regression is suggesting the use of random effects. Could there be an explanation for this?
When regressing the following, a hausman test confirms that fixed effects is preferred to random effects.
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