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RE:st: Part II: An error in the xtabond-description


From   "David M. Drukker, StataCorp" <ddrukker@stata.com>
To   statalist@hsphsun2.harvard.edu
Subject   RE:st: Part II: An error in the xtabond-description
Date   Mon, 23 Aug 2004 15:17:53 -0500

Tewodaj Mogues <tmogues@students.wisc.edu> found some typos in the [XT]
manual.  These typos involved omitted inverses from from weighting matrices
on pages 31 and 32 and these will be fixed when we reprint the manual.

Tewodaj raised a more substantive issue in claiming that the weighting
matrix for the Sargan statistic

> should really involve the residuals from the two-step estimation,
> not from the one-step estimation.

In a subsequent message, Giovanni Bruno <giovanni.bruno@uni-bocconi.it>
agreed with Tewodaj.

While it is possible to define a Sargan statistic that uses the one-step
moment conditions and the two-step weighting matrix, this is not the
one-step Sargan test suggested by Arellano and Bond (1991).  The one-step
Sargan statistic reported by -xtabond- is the s_1 statistic suggested by
Arellano and Bond (1991) page 282, it uses the one-step residuals.


  --David
    ddrukker@stata.com

References

Arellano, M. and Bond, S. (1991) "Some tests of specification for panel data:
Monte Carlo evidence and an application to Employment Equations", The Review
of Economic Studies, 58(2) 277-297.
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