Hi there,

I have a panel data and I want to do Hausman Test but it keeps on showing this note:

. hausman fe re


Note: the rank of the differenced variance matrix (2) does not equal the number of coefficients being tested (3); be sure
this is what you expect, or there may be problems computing the test. Examine the output of your estimators for
anything unexpected and possibly consider scaling your variables so that the coefficients are on a similar scale.

---- Coefficients ----
| (b) (B) (b-B) sqrt(diag(V_b-V_B))
| fe re Difference S.E.
-------------+----------------------------------------------------------------
ENV_w | -.0038478 -.0080422 .0041944 .0020483
RDEV_w | -36.91599 5.822116 -42.73811 7.913736
SIZE_w | .0000109 -7.44e-06 .0000184 9.02e-06
------------------------------------------------------------------------------
b = consistent under Ho and Ha; obtained from xtreg
B = inconsistent under Ha, efficient under Ho; obtained from xtreg

Test: Ho: difference in coefficients not systematic

chi2(2) = (b-B)'[(V_b-V_B)^(-1)](b-B)
= 31.32
Prob>chi2 = 0.0000


I tried to follow your suggestion on other posts to use sigmamore on my hausman command, but the note still shows.

. hausman fe re,sigmamore

Note: the rank of the differenced variance matrix (2) does not equal the number of coefficients being tested (3); be sure
this is what you expect, or there may be problems computing the test. Examine the output of your estimators for
anything unexpected and possibly consider scaling your variables so that the coefficients are on a similar scale.

---- Coefficients ----
| (b) (B) (b-B) sqrt(diag(V_b-V_B))
| fe re Difference S.E.
-------------+----------------------------------------------------------------
ENV_w | -.0038478 -.0080422 .0041944 .0021063
RDEV_w | -36.91599 5.822116 -42.73811 7.999969
SIZE_w | .0000109 -7.44e-06 .0000184 9.10e-06
------------------------------------------------------------------------------
b = consistent under Ho and Ha; obtained from xtreg
B = inconsistent under Ha, efficient under Ho; obtained from xtreg

Test: Ho: difference in coefficients not systematic

chi2(2) = (b-B)'[(V_b-V_B)^(-1)](b-B)
= 30.58
Prob>chi2 = 0.0000


Why is the note keep showing? Will it affect my regression result? What should I do?



Thank you,
Clarine Caine