I am performing a Hausman test on panel data to determine whether to choose Random Effects or Fixed Effects for my analysis. After performing the test I get this error:
chi2(2) = (b-B)'[(V_b-V_B)^(-1)](b-B) = -8.32 chi2<0 ==> model fitted on these data fails to meet the asymptotic assumptions of the Hausman test; see suest for a generalized test
What does this mean? Is this result OK, and it simply means that I should use random effects or something is terribly wrong here? I cannot use suest as the software suggest, because that's not for panel data.
In addition, when I change the order of the analysis, i.e. I estimate re first, and then fe, and do: hausman random fixed, I get a "normal" result, like this:
chi2(17) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 411.18 Prob>chi2 = 0.0000
However, I read on Statalist that it is not as simple as changing the order, since you get a wrong statistic.
So, the question is, what to do in this case, can I change the order of the estimation? I am pretty sure that FE does not work well with my data, but I need a way to prove it.
Please consider I am not a statistician, so the simpler the answer, the better.