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st: Odd change in R^2 with IV regression


From   "Shaw, Jim (NIH/NCI)" <shawjim@mail.nih.gov>
To   "Statalist (E-mail)" <statalist@hsphsun2.harvard.edu>
Subject   st: Odd change in R^2 with IV regression
Date   Mon, 28 Jul 2003 07:24:10 -0400

Dear Statalist:

I have run into an odd situation when using ivreg2.  Upon adding a
particular variable (X) to a regression model as an included instrument
(i.e., exogenous regressor), both the centered and uncentered R^2 decline.
The variable X is significantly related to the outcome Y in the model.  When
I estimate the same model using 2SLS, the R^2 also declines when X is added
as an exogenous variable.  However, the centered R^2 is much greater in
magnitude than when GMM is used.  Any thoughts as to why this might be
occurring?  Is it something I should be worried about?  Are the R^2
statistics reported by ivreg2 valid in such a situation?  If not, what
should I report?  

Thanks.

--
James W. Shaw
Research Associate 
College of Pharmacy
The University of Arizona 
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