Hausman Test

Calculate the Hausman specification test comparing a Fixed Effects and a Random Effects fit of dependent_tickers (the panel of entities) on a regressor x.

Also known as: Hausman specification test, Hausman-Wu test.

Random Effects is more efficient than Fixed Effects but relies on entity effects being uncorrelated with the regressor(s) – if that assumption is violated, Random Effects is inconsistent while Fixed Effects remains consistent regardless. See panel_data_model.get_hausman_test for the full formula and references, and get_fixed_effects/get_random_effects for how the two models being compared are estimated (including how independent_tickers/independent_column shape the panel, and why independent_column is generally the more reliable choice here).

Hausman Test in Python

get_hausman_test is part of the Econometrics module of the open-source Finance Toolkit. Install it with:

pip install financetoolkit -U

Then call get_hausman_test as shown below.

from financetoolkit import Toolkit

toolkit = Toolkit(
    ["AAPL", "MSFT", "AMZN"], api_key="FINANCIAL_MODELING_PREP_KEY"
)

toolkit.econometrics.get_hausman_test(
    independent_column="Volume", period="weekly"
)

Which returns:

Parameters

get_hausman_test accepts the following parameters:

• independent_tickers (str | list[str] | None, optional): The factor ticker(s), whose column values are broadcast identically to every entity at each date. Mutually exclusive with independent_column.
• independent_column (str | None, optional): A different historical data column, taken per-entity from each of dependent_tickers’ own data, to use as the regressor. Mutually exclusive with independent_tickers.
• dependent_tickers (str | list[str] | None, optional): The panel of entity tickers to explain. Defaults to None, meaning every ticker in the Toolkit instance (other than independent_tickers, if given).
• period (str, optional): The data frequency (daily, weekly, monthly, quarterly, or yearly). Defaults to “daily”.
• column (str, optional): The dependent variable’s historical data column. Defaults to “Return”.
• rounding (int | None, optional): The number of decimals to round the results to. Defaults to None.

Related Panel Data