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).

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Calculate the Hausman Test in Python

The Hausman Test is available in 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:

Metric Value
Hausman Statistic 8.1289
Degrees of Freedom 1
P-Value 0.0044
Prefer Fixed Effects (5%) 1

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.
Fixed Effects Random Effects

The Econometrics module page introduces the module, and the sidebar lists all of its functions.

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