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st: xtabond and Sargan's test with large samples


From   =?utf-8?Q?Mj=C3=B8s_Aksel_=28SNF=29?= <Aksel.Mjos@snf.no>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: xtabond and Sargan's test with large samples
Date   Mon, 1 Oct 2007 21:40:20 +0200

Hi!
 
I run an unbalanced panel with a total of 475,000 firm-years spread over up to 12 years per firm. Firstly, I am not able to turn more than app. 10 % of the sample in xtabond2 due to size limits, but even with xtabond, I have problems.  Whichever way I specify my rather simple regression of debt-ratio, I cannot avoid that the Sargan test rejects the null of no over-identification. It is frequently discussed that this test has finite sample biases, but does anyone know whether it is reliable for really large samples?  - and would there be any relevant alternatives? If not, what are the potential solutions?
 
Thanks for any advice!
 
Best regards
Aksel Mjos
Norwegian School of Economics and Business Administration, Bergen

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