What is the null hypothesis for a Hausman test for endogeneity?
A)cov (z,x) 0
B)cov(x,e) 0
C)cov(x,e)= 0
D)e is normally distributed

Question

What is the null hypothesis for a Hausman test for endogeneity?
A)cov (z,x)> 0
B)cov(x,e)> 0
C)cov(x,e)= 0
D)e is normally distributed

Quizplus · Accepted Answer

The null hypothesis for a Hausman test for endogeneity is that there is no correlation between the explanatory variables and the error term (i.e. the variables are exogenous). Therefore, the correct choice is C, cov(x,e)=0, representing that there is no correlation between the independent variables and the error term. The choices A and B represent a positive correlation between the variables and the error term, which is opposite to what the Hausman test aims to test. The choice D is irrelevant to the Hausman test for endogeneity.

What Is the Null Hypothesis for a Hausman Test for Endogeneity