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Re: st: the Sargan test


From   "Mark Schaffer" <M.E.Schaffer@hw.ac.uk>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: the Sargan test
Date   Thu, 14 Apr 2005 11:14:48 +0100

Rateb,

Your interpretation of the Sargan test statistic is correct.  
However, 90 degrees of freedom is a lot, and it's possible that test 
has very little power if you use a lot of instruments, esp. if the 
number of observations isn't very large.  You might try reestimating 
using a smaller number of lags as a test of the robustness of your 
results.

Hope this helps.

--Mark

Date sent:      	Thu, 14 Apr 2005 15:20:42 +1000 (EST)
From:           	"Rateb Abu-Sharia" <r.abusharia@uws.edu.au>
To:             	statalist@hsphsun2.harvard.edu
Subject:        	st: the Sargan test
Send reply to:  	statalist@hsphsun2.harvard.edu

> Dear Sir/Madam:
> 
> In reference to GMM methods in STATA8 (Arellano and Bond model,
> xtabond), I am trying to introduce instrumental variables to fix the
> endogeneity problem caused by fixed and random effects regressions.
> 
> I have a question concerning the Sargan test of over-identifying
> restrictions after using the recommended two-step specification, I find
> the Sargan test for all cases in my study with p-value equal 1
> suggesting not to reject the over-identifying restrictions, as follows:
> 
> Sargan test of over-identifying restrictions:
>          chi2 (90) = 0.00      Prob > chi2 = 1.0000
> 
> However, Does it “P-value equal one” means that I am working on the
> right practice of the “Sargan test” or is there any problem with this P-
> value? If any, could you give me please your advice to which value
> should I rely on? I look forward to your response.
> 
> Your cooperation would be much appreciated.
> 
> 
> 
> Many thanks
> 
> Rateb Abu-Sharia
> School of Economics & Finance
> University of Western Sydney
> Phone: +61 2 9890 3245
> Mob. +61 405 114 031
> 
> *
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Prof. Mark E. Schaffer
Director
Centre for Economic Reform and Transformation
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS  UK
44-131-451-3494 direct
44-131-451-3296 fax
44-131-451-3485 CERT administrator
http://www.sml.hw.ac.uk/cert


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