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st: RE: newey2 and first-stage results


From   "Rodrigo Alfaro A." <ralfaro@bcentral.cl>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: newey2 and first-stage results
Date   Wed, 25 Jun 2008 18:12:28 -0400

///

Todd, 

It is not a particular issue of newey2, it is 
how std error are computed with IV estimators
(also R2 and F-stat). For example:

sysuse auto
ivreg price (mpg =  trunk weight length)
reg mpg trunk weight length
predict yhat
reg price yhat

You should take a look of IV estimators.

Rodrigo.



  

-----Mensaje original-----
De: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] En nombre de Todd D. Kendall
Enviado el: Miércoles, 25 de Junio de 2008 06:00 p.m.
Para: statalist@hsphsun2.harvard.edu
Asunto: st: newey2 and first-stage results

I have learned a lot from reading Statlist -- thanks to everyone who writes and answers questions.  Now I have a question of my own, and I haven't been able to find anything in the archives so far.

I am trying to figure out just what newey2 does with instruments.
When I specify

. newey2 y (x1 =z1) x2, lag(1) first

STATA gives me just the first-stage results I would expect -- in fact, I can replicate these first stage results with

. reg x1 z1 x2

However, if I try taking the predicted values from this first stage:

. predict x1hat

and "manually" running the IV results:

. newey y x1hat x2, lag(1)

I get the right coefficients (obviously), but the wrong standard errors.  I surmise that newey2 must be doing something special with the part of the covariance matrix associated with the first-stage fitted values.  I have tried to read through the newey2 ado file, but can't see exactly what's going on.

I'd appreciate any thoughts from anyone who understands newey2 better than I.

Thanks,
Todd
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