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Re: st: Critical values for stock and yogo test when the clusteroption is used


From   "Danny Cohen-Zada" <danoran@bgu.ac.il>
To   <statalist@hsphsun2.harvard.edu>
Subject   Re: st: Critical values for stock and yogo test when the clusteroption is used
Date   Wed, 27 Feb 2008 16:57:59 +0200

Dear Professor Austin and other statalist subscribers

I only want to add that in the email today I clarified something that wasn't clear enough in the private mail yesterday. The points is that the results much differ if I use the clustered f-statistic instead of the regular one.
The regular f-statistic is 158 which is extremely above the regular critical value (the critical values are between 5.53-16.38). This indicate that the instrument is extremely strong. However, if i compare the clustered f-statistic (5.26) to the regular critical values I may come to an opposite conclusion that my instrument is quite weak (it is only close to the 25% maximal iv size). Should i worry about the strength of my instrument? After all, i guess that as the clustered f-statistic is much lower than the regular one, the clustered critical value should also be lower? That is, don't we require to much when we compare the clustered f-statistic to the regular critical values.

Best,

Danny


----- Original Message ----- From: "Austin Nichols" <austinnichols@gmail.com>
To: <statalist@hsphsun2.harvard.edu>
Sent: Wednesday, February 27, 2008 3:36 PM
Subject: Re: st: Critical values for stock and yogo test when the clusteroption is used



All--
My reply (Tue, Feb 26, 2008 at 4:42 PM) to this interlocutor's private
email yesterday was:
***************
Until someone redoes Stock and Yogo with various kinds of clustering,
you are stuck comparing your value to their table. One reason no one
has done that is that different kinds of clustering might produce
different answers, so the critical values might be more
problem-specific, and you might have to run your own simulations for
your own case, using observed intra-cluster correlations in the data.
***************
If anyone has a different answer, I'd be interested to hear it. Note
that the ref for Stock and Yogo is in the help for -ivreg2- on SSC and
in http://www.stata.com/meeting/5nasug/wiv.pdf.

On Wed, Feb 27, 2008 at 7:33 AM, Danny Cohen-Zada <danoran@bgu.ac.il> wrote:

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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