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st: Re: Hausman test for IV-GMM v OLS


From   Christopher F Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: Re: Hausman test for IV-GMM v OLS
Date   Thu, 19 Feb 2004 06:49:15 -0500

On Feb 19, 2004, at 2:33 AM, M. wrote:

Dear Friends,
Now i am doing a Hausman specification test, testing the difference
between GMM-instrumental variable estimates and OLS estimates for the possible
endogenity of the regressors. In some cases i getting negative Chi-square
value. (This is because the variance-covariance matrix of the differeces of the
coefficients is not positive definite) How can I interpret it? In the case of
negative chi-square values, can i accept the null hypothesis? Any suggestions
andcomments are most welcome.
Thanking you in advance,
M Parameswaran
Suggest you read the Stata Journal (v3:1) paper by Baum, Schaffer, Stillman on IV and GMM; it is also available from our dept webpage as a working paper (http://www.bc.edu/economics). Our 'ivreg2' (which does IV-GMM) performs an equivalent test which does not run afoul of the problems that the Hausman test encounters in small samples.

Kit

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