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From |
Mark Schaffer <M.E.Schaffer@hw.ac.uk> |

To |
statalist@hsphsun2.harvard.edu, Tae Hun Kim <thkim91@gmail.com> |

Subject |
Re: st: Heteroskedastic robust version of endogeneity test |

Date |
Mon, 28 Feb 2005 23:44:21 +0000 (GMT) |

Tae Hun, Quoting Tae Hun Kim <thkim91@gmail.com>: > Hello Statalist. > I would appreciate some help on the following problem. > I want to conduct heteroskedastic robust endogeneity test. Most > previous postings related to endogeneity test assume conditional > homoskedasticity. As long as I know, if error term is > heteroskedastic, > p-value is wrong. so, we might obtain wrong conclusion. > > To test endogeneity (heteroskedastic robust version) > --------- equation---- > . ivreg2 fmom y87 y88 y89 y90 y91 y92 y93 y94 y95 y96 y97 y98 y99 y00 > y01 y02 s87 s88 s89 s90 s91 s92 s93 s94 s95 s96 s97 s98 s99 s00 s01 > s02 smom ( = dgovern dratio ), gmm orthog(smom); > **Smom : suspected engogenous variable > ----test result--------- > Hansen J statistic (Lagrange mulitplier test of excluded > instruments): > 27.609 > Chi-sq(2) P-val = 0.00000 > C statistic (exogeneity/orthogonality of specified instruments): > > 20.990 > Chi-sq(1) P-val = 0.00000 > Instruments tested: smom > ------------------------------------------------------------------------------ > Instruments: y87 y88 y89 y90 y91 y92 y93 y94 y95 y96 y97 y98 y99 y00 > y01 y02 s87 s88 s89 s90 s91 s92 s93 s94 s95 s96 s97 s98 s99 s00 s01 > s02 smom dgovern dratio > ------------------------------------------------------------------------------ > > I think the result says 'smom' is endogenous(C-ststistic:20.990) and > two excluded instruments are not orthogonal to the error term(Hansen J > statistic :27.609) > Q1. My code and My interpretation are right? Mostly yes. I think you should update your version of -ivreg2-, because the latest version will display the J statistics for both the constrained (smom exogenous) and unconstrained (smom endogenous) specifications. You'll probably find that both have J statistics that suggest that the orthogonality conditions aren't met (one will be 27.609 and the other will be about 7). This implies that the C-statistic doesn't mean much, because you are comparing two misspecified equations. But see below. > But I just tried to test overidentification as the following > equation > ivreg2 fmom y87 y88 y89 y90 y91 y92 y93 y94 y95 y96 y97 y98 y99 y00 > y01 y02 s87 s88 s89 s90 s91 s92 s93 s94 s95 s96 s97 s98 s99 s00 s01 > s02 (smom=dgovern dratio), gmm; > ----------test result------------ > Hansen J statistic (overidentification test of all instruments): > > 3.633 > Chi-sq(1) P-val = 0.05665 > ------------------------------------------------------------------------------ > Instrumented: smom > Instruments: y87 y88 y89 y90 y91 y92 y93 y94 y95 y96 y97 y98 y99 y00 > y01 y02 s87 s88 s89 s90 s91 s92 s93 s94 s95 s96 s97 s98 s99 s00 s01 > s02 dgovern dratio > ------------------------------------------------------------------------------ > > the result indicates that instruments are orthogonal under 5% > significance level > > Q2 : why two results are different? Did i miss something? This one is equivalent to the unconstrained version mentioned above (smom endogenous). The difference is, I think, because the first version uses an estimate of the covariance matrix of orthogonality conditions that guarantees a positive C statistic, which is different from the one used here. In my experience, the difference is usually small, but yours is a bit larger than usual. That said, the conclusions don't differ that much - a p-value of 6% is basically just as much a concern as a p-value of 5%! Hope this helps. Mark > Thanks in advance, > > T.H Kim > * > * For searches and help try: > * http://www.stata.com/support/faqs/res/findit.html > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ > Prof. Mark Schaffer Director, CERT Department of Economics School of Management & Languages Heriot-Watt University, Edinburgh EH14 4AS tel +44-131-451-3494 / fax +44-131-451-3294 email: m.e.schaffer@hw.ac.uk web: http://www.sml.hw.ac.uk/ecomes ------------------------------------------------------------------- DISCLAIMER This message is subject to http://www.hw.ac.uk/disclaim.htm ------------------------------------------------------------------- * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**References**:**st: Heteroskedastic robust version of endogeneity test***From:*Tae Hun Kim <thkim91@gmail.com>

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