Hi everyone.

I'm doing research on the effects of CEO personality on the debt ratio of Belgian listed companies. I'm using panel data for 54 firms, observed over 5 years, with a total number of observations of 270 for each variable (strongly balanced panel).

I tested for heteroscedasticity using both Breusch-Pagan test and White test, but they produced different results. Breusch-Pagan fails to reject homoscedasticity with a p-value = 0,1206, but White does reject it (p-value = 0,0000).

As White-test is a more general form of Breusch-Pagan, and it also tests of non-linear forms of heteroscedasticity, I decided to go with results of White-test and use robust standard errors.

For choosing between FEM or REM however, I ran both -xtoverid-, and -rhausman- command. While -xtoverid- with p-value of 0,0000 implies I should go with Fixed Effects, -rhausman- with a p-value of 0,96 contradicts this and depicts RE is the way to go.

Which one should be followed and what's the difference between them?


Many thanks in advance!