Thanks, Mark! Does the error message mean anything wrong in the first stage regression and/
or in the second stage regression? How did this happen?
I examined the outputs from the first stage and second stage regressions. There are no
estimates and test statistics such as F that are missing. Does one still have to interpret the
results from the first stage and/or second stage regression with caution?
Thank you very much!
Jian Zhang
> Jian Zhang,
>
> > -----Original Message-----
> > From: Jian Zhang [mailto:jzh@ucdavis.edu]
> > Sent: Sunday, August 20, 2006 4:16 AM
> > To: Schaffer, Mark E; statalist@hsphsun2.harvard.edu
> > Subject: RE: st: RE: a question about option orthog for
> > command ivreg2
> >
> >
> > Thanks, Mark! But when I run ivreg2 (using the updated
> > version), the results reported that (right after the first
> > stage regression results):
> >
> > Error: estimated covariance matrix of moment conditions not
> > of full rank;
> > overidentification statistic not reported, and
> > standard errors and
> > model tests should be interpreted with caution Possible causes:
> > singleton dummy variable (dummy with one 1 and N-1 0s
> > or vice versa)
> > -fwl- option may address problem. See help ivreg2.
> >
> > It stated "overidentification statistics nor reported".
> > However at the end of the second stage regression, it showed
> > IN FACT the value of the Hansen J statistic
> > (overidentification test of all instruments). Why did STATA
> > report overidentification statistics after it already stated
> > "overidentification statistics nor reported"? This seems
> > inconsistent.
>
> The error message appears within the first-stage regression results,
> right? Then it refers to the first-stage regression results, not the
> main results. You are right to point out that this is inconsistent. It
> arises because ivreg2 is called recursively to do the first-stage
> regression, in which (of course) there are never any overidentification
> stats reported.
>
> Probably we should fix this.
>
> > Also if estimated covariance matrix of moment conditions is
> > not of full rank, will we not be able to obtain estimates of
> > GMM? It seems to me that if this matrix is not of full rank,
> > this means that we could not get the weighted matrix (since
> > the weighted matrix is the inverse of estimated covariance
> > matrix of moment conditions). Is this right?
>
> Right. Again explained by this relating to the first stage regressions,
> not the main eqn.
>
> > In addition, I have been trying the examples provided at the
> > end of the documentation for ivreg2 using the Griliches data.
> > It seems that there is a problem on the consistencies of the
> > results from different overidentifiying restriction testings.
> >
> > First I run regression:
> >
> > ivreg2 lw s expr tenure rns smsa _I* (iq=med kww age mrt),
> > gmm orthog(age mrt)
> >
> > The Hansen J statistic indicated that instruments med kww age
> > and mrt are not valid (i.e., correlated with the error
> > term). The C statatistic indicated that the subset of
> > instruments age and mrt are not valid. However, when I run
> > the following regression:
> >
> > ivreg2 lw s expr tenure rns smsa _I* (iq=age mrt), gmm
> >
> > the Hansen J statistic indicated that instruments age and mrt
> > are valid. It seems that two sets of regressions gave
> > inconsistent results on the validity of instruments age and
> > mrt. Why does this
> > happen? Which result should we trust?
>
> Roughly speaking, med and kww identify a different parameter value for
> the coefficient on iq vs. the one identified by age and mrt. Which one
> you believe depends on other information: your priors, or strength of
> identification, or whatever. For example, you might have a priori
> doubts about whether a variable is a plausible instrument, or you might
> put more weight on the med-kww results because age-mrt are weak
> instruments, or....
>
> Cheers,
> Mark
>
> > I found your emaill
> > response to someone else in 2004 in
> > the statalist but could not really find an answer to this
> > from your email response. Many thanks!
> >
> > Best regards,
> > Jian Zhang
> >
> >
> >
> >
> >
> >
> >
> > > Jian Zhang,
> > >
> > > > -----Original Message-----
> > > > From: owner-statalist@hsphsun2.harvard.edu
> > > > [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Jian
> > > > Zhang
> > > > Sent: 18 August 2006 21:23
> > > > To: statalist@hsphsun2.harvard.edu
> > > > Subject: st: a question about option orthog for command ivreg2
> > > >
> > > > Dear Statalisters,
> > > >
> > > > I am using ivreg2 command to implement GMM estimation on a panel
> > > > data set. I specified option orthog( ) to examine if a
> > subset of my
> > > > instruments are really exogenous (by putting the list of
> > the subset
> > > > of instruments in the parentheses of orthog). However,
> > the results
> > > > reported by STATA say
> > > > that:
> > > >
> > > > Collinearity/identification problems in restricted equation:
> > > > C statistic not calculated for orthog option
> > >
> > > First, you should check that you are using the latest version of
> > > -ivreg2-; I think the wording of this error message is from
> > an earlier
> > > version. The problem with the wording is that when the subset of
> > > instruments is tested, the equation is, if anything, better
> > described
> > > as UNrestricted - because the variables listed are no
> > longer "restricted"
> > > to being assumed exogenous.
> > >
> > > Anyway... after you update, you can find out what is going on by
> > > estimating the 2nd equation by hand. Put the instruments listed in
> > > orthog() in either the list of endogenous regressors (if they were
> > > exogenous regressors in the original eqn), or omit them
> > entirely (if
> > > they were excluded instruments in the original eqn). FWIW,
> > my guess
> > > is that the 2nd equation is either exactly identified or
> > unidentified.
> > >
> > > Cheers,
> > > Mark
> > >
> > > Prof. Mark Schaffer
> > > Director, CERT
> > > Department of Economics
> > > School of Management & Languages
> > > Heriot-Watt University, Edinburgh EH14 4AS tel
> > +44-131-451-3494 / fax
> > > +44-131-451-3296
> > > email: m.e.schaffer@hw.ac.uk
> > > web: http://www.sml.hw.ac.uk/ecomes
> > >
> > > > Is there anyone knowing what is going on? Since STATA
> > has reported
> > > > the estimates of the restricted equation(i.e., the
> > regression using
> > > > the entire set of instruments (overidentifying
> > restrictions)), why
> > > > did STATA still state "collinearity/idenfification problems in
> > > > restricted equation"? Many thanks!
> > > >
> > > > Best regards,
> > > > Jian Zhang
> > > >
> > > >
> > > > *
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> > > >
> > > >
> > >
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> > >
> >
>
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