The impact of a Hausman pretest, applied to panel data, on the coverage probability of confidence intervals

Paul Kabaila, Rheanna Mainzer and Davide Farchione

Economics Letters, 2015, vol. 131, issue C, 12-15

Abstract: In the analysis of panel data that includes a time-varying covariate, a Hausman pretest is commonly used to decide whether subsequent inference is made using the random effects model or the fixed effects model. We consider the effect of this pretest on the coverage probability of a confidence interval for the slope parameter. We prove three new finite sample theorems that make it easy to assess, for a wide variety of circumstances, the effect of the Hausman pretest on the minimum coverage probability of this confidence interval.

Keywords: Coverage probability; Fixed effects model; Hausman specification test; Panel data; Random effects model (search for similar items in EconPapers)
JEL-codes: C1 C12 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:131:y:2015:i:c:p:12-15

DOI: 10.1016/j.econlet.2015.03.031

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