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st: RE: Finite sample problem while using -Hausman-, and *suest- not working with *ivreg-


From   "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: Finite sample problem while using -Hausman-, and *suest- not working with *ivreg-
Date   Thu, 3 Aug 2006 17:04:52 +0100

Sophie,

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> Sophie AUDOUSSET
> Sent: 03 August 2006 16:55
> To: statalist@hsphsun2.harvard.edu
> Subject: st: Finite sample problem while using -Hausman-, and 
> *suest- not working with *ivreg-
> 
> .
> Dear statalist,
> I'm currently trying to compare the estimates obtained via 
> two models (first model is IVREG and second model is OLS 
> regression) because one of my independant variable proved to 
> suffer from endogeneity (I've tested the endogeneity by 
> showing that this variable is correlated with the residual).
> So I run my *ivreg- model (, robust) (and store IVREG 
> estimates), then I run my OLS model (-regress- *, robust) and 
> store OLS estimates. 
> I finally run Hausman command : 
> . hausman IVREG OLS, constant sigmamore
> and I end up with a positive ChiČ stat of 53.95 (prob. 
> 0.000), which means that I have to reject the null hypothesis 
> and consider the IVREG model to be better than the OLS. My 
> problem is that I have the message "V_b-V_B is not positive 
> definite", which indicates that I'm certainly facing a finite 
> (small) sample problem (n=144*). As suggested in the help 
> file (hausman), I've tried to use the command *suest- instead 
> of *hausman-, but it seems that *suest- is not suitable for 
> IVREG models. 
> My question is: is there another command that I can use to 
> solve my problem and manage to compare the estimates of the 
> IVREG and the OLS model, in my case of a small sample ? 

-ivreg2- will do this.  From within Stata,

findit ivreg2

then follow the links to install, and use the -endog- option in your IV estimation as explained in the help file.

Cheers,
Mark

> 
> (Hereunder are the relevant stata outputs)
> 
> Thank you very much for your help
> Best Regards
> Sophie Audousset
> PhD student. HEC Paris, School of Management
> 
> ----------------------------------------------
> . hausman IVREG ORDINARY , constant sigmamore
> 
>                  ---- Coefficients ----
>              |      (b)          (B)            (b-B)     
> sqrt(diag(V_b-V_B))
>              |     IVREG       ORDINARY      Difference          S.E.
> -------------+------------------------------------------------
> ----------
> -------------+------
>       logNAF |    .2767367     .0486494        .2280873       
>  .0367947
>         size |    .3372361     .4842723       -.1470362       
>  .0272735
>       receiv |    .1583165     .5930488       -.4347323       
>  .1748345
>    sqsubsint |    .0274407     .0416121       -.0141714       
>         .
>     diversif |    .0851476     .0807569        .0043907       
>  .0113417
>     crosslis |    .3002547     .4174471       -.1171924       
>         .
>        block |    .2212551    -.3124698        .5337249       
>  .0796082
>        indep |    .7656288     .4138254        .3518033       
>  .0802583
>      onebig4 |     .527467     .4738404        .0536266       
>         .
>      twobig4 |    .5217803     .5443661       -.0225859       
>         .
>     mand12_2 |    .4531177     .3186652        .1344524       
>  .0543505
>        _cons |   -3.246519    -4.606056        1.359537       
>  .2265545
> --------------------------------------------------------------
> ----------------
>                            b = consistent under Ho and Ha; 
> obtained from ivreg
>           B = inconsistent under Ha, efficient under Ho; 
> obtained from regress
> 
>     Test:  Ho:  difference in coefficients not systematic
> 
>                  chi2(12) = (b-B)'[(V_b-V_B)^(-1)](b-B)
>                           =       53.95
>                 Prob>chi2 =      0.0000
>                 (V_b-V_B is not positive definite)
> 
> 
> *
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> 
> 

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