Thanks for the reply Kit,
I am getting results from Stata (see below) using the following syntax :
ivreg2 ad pse bonus leverage pricebook lnsize blockown (roa = beta
corp_gov), endog (roa)
Could you give me brief explanations concerning the following questions :
The endog test does not reject the exogeneity of "roa". Is this test done
after considering the instrumental variables (beta and corp_gov)? In other
words, could I have used an OLS regression? Could other variables in my
model suffer from endogeneity? Is this testable?
How do I know if the IVs I used are correct? Can I re-use any of the
exogeneous variables as IVS for "roa"?
Thanks very much for your help,
Claude
IV (2SLS) estimation
--------------------
Estimates efficient for homoskedasticity only
Statistics consistent for homoskedasticity only
Number of obs =
125
F( 7, 117) =
2.56
Prob > F =
0.0173
Total (centered) SS = .1726846849 Centered R2 =
0.1285
Total (uncentered) SS = .4273419954 Uncentered R2 =
0.6478
Residual SS = .1504946844 Root MSE =
.0347
------------------------------------------------------------------------------
absad | Coef. Std. Err. z P>|z| [95% Conf.
Interval]
-------------+----------------------------------------------------------------
roa | .0005476 .0010238 0.53 0.593 -.001459
.0025542
pse | -.0104876 .0046072 -2.28
0.023 -.0195176 -.0014576
bonus | .0308946 .0310179 1.00 0.319 -.0298993
.0916885
leverage | -.0180951 .0078834 -2.30
0.022 -.0335463 -.0026439
pricebook | .0003074 .0014905 0.21 0.837 -.0026138
.0032287
lnsize | -.001135 .0009475 -1.20 0.231 -.002992
.000722
blockown | -.0001686 .0001738 -0.97 0.332 -.0005094
.0001721
_cons | .1115809 .0247104 4.52 0.000 .0631495
.1600123
------------------------------------------------------------------------------
Underidentification test (Anderson canon. corr. LM statistic):
11.877
Chi-sq(2) P-val =
0.0026
------------------------------------------------------------------------------
Weak identification test (Cragg-Donald Wald F statistic):
6.090
Stock-Yogo weak ID test critical values: 10% maximal IV size
19.93
15% maximal IV size
11.59
20% maximal IV size
8.75
25% maximal IV size
7.25
Source: Stock-Yogo (2005). Reproduced by permission.
------------------------------------------------------------------------------
Sargan statistic (overidentification test of all instruments):
0.927
Chi-sq(1) P-val =
0.3357
-endog- option:
Endogeneity test of endogenous regressors:
0.103
Chi-sq(1) P-val =
0.7483
Regressors tested: roa
------------------------------------------------------------------------------
Instrumented: roa
Included instruments: pse bonus leverage pricebook lnsize blockown
Excluded instruments: beta corp_gov
------------------------------------------------------------------------------
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