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st: Part II: An error in the xtabond-description
A quick follow up to my earlier message. There seems to be another error (please let me know if I'm wrong, anybody) in the Stata manual's xtabond description. This time it concerns the Sargan test on p. 32 bottom. The weight in the Sargan test statistic S2 that the manual indicates is A2, which is defined on p.31 and involves the residuals from the one-step estimation.
However, looking both in the original paper of Arellano and Bond 1991, as well as in Bond 2002 ("Dynamic Panel Data Models: A Guide to Micro Data Methods and Practice" ... by the way, this is a wonderfully intuitive treatment of estimation methods for dynamic panel data models, I would highly recommend it!), the weight should really involve the residuals from the two-step estimation, not from the one-step estimation.
Date: Sat, 21 Aug 2004 11:18:47 -0400
From: TEWODAJ MOGUES <email@example.com>
Subject: st: Error in xtabond-description in the manual
Dear Statalisters (and Stata programmers)
I don't know if I have not-the-newest Stata manual books, but in the one I have there is an error in the way that the mathematical expression of the Arellano-Bond estimator (programmed by xtabond) is written down. In the xt book, on page 31, The expressions for delta2-hat and for Q2 should include A2^(-1), and not A2.
Dept. of Agricultural and Applied Economics
University of Wisconsin - Madison
427 Lorch St. #317, Taylor Hall
Madison, WI 53706
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