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st: RE: Interpretation of Smith-Blundell exog. test


From   "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: Interpretation of Smith-Blundell exog. test
Date   Tue, 18 Apr 2006 09:15:57 +0100

Ivar, 

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> Ivar Pettersen
> Sent: 18 April 2006 02:53
> To: statalist@hsphsun2.harvard.edu
> Subject: st: Interpretation of Smith-Blundell exog. test
> 
> Hello.
> 
> I've got a Q related to the interpretation of the Smith-Blundell test.
> It is provided both by *ivprobit* and *probexog*.
> The help file for probexog states "A rejection indicates that 
> the standard probit (tobit) estimator should not be employed."
> So if rejected one should use an IV-technique. 
> 
> When the test is run it is necessary to provide some 
> instruments. The question is: would not a rejection also mean 
> that the instruments you have provided are not good enough in 
> an IV-estimation?

In fact, for the test to be valid, you have to assume that the
instruments *are* good enough for an IV estimation.  The test is a test
of the exogeneity of the specified regressor.  If you reject, it means
you need to treat it as endogenous and therefore instrument; if you fail
to reject, it means you can consider treating it as exogenous.

Maybe you are thinking of a test of overidentifying restrictions.
That's a test of the exogeneity of the instruments; a rejection there
means the instruments are not valid.

HTH.

--Mark

> Sincerely
> Ivar Pettersen
> 
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