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st: Critical values for stock and yogo test when the cluster option is used


From   "Danny Cohen-Zada" <danoran@bgu.ac.il>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: Critical values for stock and yogo test when the cluster option is used
Date   Wed, 27 Feb 2008 14:33:23 +0200

I would be thankful to anybody that can give me an advice concerning the critical values in the stock and yogo test.







I estimate the following IV model with the cluster option



ivreg2 y1 x1 x2 (y2 = z1 ), ffirst cluster (x3)



(In my model I have only one endogenous regressor and one excluded instrument).





I know that the Stock and Yogo statistic assume conditional homoskedasticity and independence. Since I use the cluster option I can not use the reported stock and yogo statistic (f statistic on the exluded instrument) and the reported critical values.



I know that I can use the command ffirst to obtain the corrected f statistic on the excluded instrument. It differ substantially from the unclustered f statistic (regular = 158, clustered=5.26, the regular critical values are in the range 5.53-16.38). However, I still have a problem because I do not know what the corrected critical values are (I guess that I can not use the regular critical values). If i used the regular f-statistic and the regular critical values i find that my instruments are very very strong. This picture is changed if i compare the corrected f-statisticto the regular critical values.



I would be thankful to anybody who knows how I can check that my instruments are not weak in a regression where the cluster option is used. Specifically, to which value should I compare the corrected f-statistic on the excluded instrument obtained by the command ffirst.


Best,

Danny


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