# re : st: re: 2SLS and Hausman test

 From Claude Francoeur To statalist@hsphsun2.harvard.edu Subject re : st: re: 2SLS and Hausman test Date Wed, 28 Nov 2007 11:57:04 -0500

```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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```