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RE: st: xtivreg2, overidxt,

From   "Schaffer, Mark E" <>
To   <>
Subject   RE: st: xtivreg2, overidxt,
Date   Thu, 15 Mar 2007 15:12:20 -0000

Nicola et al., 

> -----Original Message-----
> From: 
> [] On Behalf Of 
> Sent: 15 March 2007 11:17
> To:
> Cc:
> Subject: Re: st: xtivreg2, overidxt,
> May be you installed -ivreg2- from SJ rather than from ssc, 
> which usually provides the newest version. Solution:
> ssc install ivreg2, replace
> For the interpretation, it depends on what you think about 
> the p-value. If you usually reject the null hypothesis for 
> any p<5%, then everything is fine. I you reject the null 
> hypothesis also for any 10%<p<5%, then the test casts doubt 
> on the validity of the instruments. Please note that 
> -xtoverid- produces a similar test and may give slightly 
> different results (running the example at the end of the help 
> for -overidxt- yealds a p=.4138; re-running with -xtoverid- 
> yealds a p=.4411)

In case you're curious, the reason for the difference is that -xtoverid-
(and -xtivreg2-) correct for the loss of degrees of freedom because of
the fixed effects, which are nuisance parameters.  -overidxt- does not
make this correction, and as a result it is more likely (too likely) to
reject the null of valid instruments.

It's similar to the adjustment needed for the error variance when
constructing the var-cov matrix for the fixed effects estimator.  The
error variance is bigger after the adjustment (and hence p-values for
paramater tests are bigger); here, the overid statistic is smaller after
the adjustment (and hence the p-value is bigger).  Or, put another way,
the usual Sargan overid test is an N*R2 test.  In a balanced panel with
N fixed effects and T periods, it's an (NT-N)*R2 test, because in effect
N observations are "lost" because of the estimation of the fixed


> Nicola
> At 02.33 14/03/2007 -0400, wrote:
> >Dear statalist,
> >I have some problems to implement xtivreg2 because stata 
> give me this error:
> >Error - must have ivreg2 (or ivreg28, for Stata 8 users) version
> >2.1.15 or greater installed
> >r(601);
> >
> >I have update stata, I use stata 9 and I installed the 
> package iverg28 
> >and ivreg2.
> >
> >Other question is: how I interpret overidxt? when my p value 
> is 10% my 
> >instrument is correleted with my dipendent variable? or I refuse the 
> >null hypothesis  and so the instrument that I use is ok?
> >thanks so much for your help
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