If you perform a Hausman test on a random effects model and have a test statistic that exceeds your critical value,what should you conclude?
A)all of the regressors in the RE model are exogenous
B)none of the common RE and FE coefficients are significantly different
C)at least one of the coefficients is significantly different from zero
D)at least one of the regressors in the RE model is endogenous

Question

Quizplus · Accepted Answer

If the Hausman test statistic exceeds the critical value, it means that the null hypothesis (random effects are consistent) is rejected in favor of the alternative hypothesis (the random effects model is inconsistent and the fixed effects model should be used instead). This suggests that at least one of the regressors in the random effects model is endogenous, meaning it is correlated with the error term. Therefore, we should conclude that choice D is the correct answer.

If You Perform a Hausman Test on a Random Effects