st: How can I interpret the result of xtabond2 ?

 From "Lee, Seung-Won (MU-Student)" To statalist@hsphsun2.harvard.edu Subject st: How can I interpret the result of xtabond2 ? Date Mon, 22 Sep 2008 23:18:15 -0500

```Dear stata users

I'm a just beginner for xtabond2, so I don't know how to interpret the result below especially regarding

Arellano-Bond autocorrelation test, Sargan test and Hansen test.

I'm not sure but my guess is that it says that there is both AR(1) and AR(2), may be some IVs are correlated with error term.  If my guess is right, then what should I do?

Please see my log below and help!!

. xtabond2 dlcapx l1_dlcapx dls l1_xinter4 l1_minter4 y9* y0*, gmm(l1_dlcapx dls) iv(l1_xinter4 l1_minter4 y9* y0*, equation(level)) orth
> ogonal robust twostep
Favoring speed over space. To switch, type or click on mata: mata set matafavor space, perm.
y90 dropped due to collinearity
y91 dropped due to collinearity
y92 dropped due to collinearity
y93 dropped due to collinearity
y94 dropped due to collinearity
y95 dropped due to collinearity
y96 dropped due to collinearity
y97 dropped due to collinearity
y07 dropped due to collinearity
Warning: Two-step estimated covariance matrix of moments is singular.
Using a generalized inverse to calculate optimal weighting matrix for two-step estimation.
Difference-in-Sargan statistics may be negative.
Dynamic panel-data estimation, two-step system GMM
------------------------------------------------------------------------------
Group variable: gvkey                           Number of obs      =      3607
Time variable : year                            Number of groups   =       874
Number of instruments = 218                     Obs per group: min =         2
Wald chi2(13) =    211.52                                      avg =      4.13
Prob > chi2   =     0.000                                      max =        10
------------------------------------------------------------------------------
|              Corrected
dlcapx |      Coef.   Std. Err.      z    P>|z|     [95% Conf. Interval]
-------------+----------------------------------------------------------------
l1_dlcapx |  -.2007464   .0302184    -6.64   0.000    -.2599734   -.1415195
dls |   .6778161   .0993139     6.82   0.000     .4831644    .8724677
l1_xinter4 |   -2.53827    1.47796    -1.72   0.086     -5.43502    .3584791
l1_minter4 |   17.70894   5.754314     3.08   0.002     6.430696    28.98719
y98 |  -.0185858   .2891494    -0.06   0.949    -.5853082    .5481365
y99 |  -.0792788   .2839134    -0.28   0.780    -.6357388    .4771813
y00 |  -.0249017   .2810219    -0.09   0.929    -.5756945    .5258911
y01 |  -.2103614   .2918474    -0.72   0.471    -.7823718     .361649
y02 |  -.2527464   .2846071    -0.89   0.375    -.8105661    .3050734
y03 |  -.0863709   .2797089    -0.31   0.757    -.6345903    .4618485
y04 |   .2565646   .2892443     0.89   0.375    -.3103438    .8234729
y05 |   .1678996   .2790313     0.60   0.547    -.3789918    .7147909
y06 |   .0993331   .2821207     0.35   0.725    -.4536133    .6522794
_cons |  -.0553731    .277753    -0.20   0.842     -.599759    .4890129
------------------------------------------------------------------------------
Instruments for orthogonal deviations equation
GMM-type (missing=0, separate instruments for each period unless collapsed)
L(1/.).(l1_dlcapx dls)
Instruments for levels equation
Standard
_cons
l1_xinter4 l1_minter4 y90 y91 y92 y93 y94 y95 y96 y97 y98 y99 y00 y01 y02
y03 y04 y05 y06 y07
GMM-type (missing=0, separate instruments for each period unless collapsed)
D.(l1_dlcapx dls)
------------------------------------------------------------------------------
Arellano-Bond test for AR(1) in first differences: z =  -6.72  Pr > z =  0.000
Arellano-Bond test for AR(2) in first differences: z =  -3.23  Pr > z =  0.001
------------------------------------------------------------------------------
Sargan test of overid. restrictions: chi2(204)  = 621.40  Prob > chi2 =  0.000
(Not robust, but not weakened by many instruments.)
Hansen test of overid. restrictions: chi2(204)  = 238.63  Prob > chi2 =  0.049
(Robust, but can be weakened by many instruments.)
Difference-in-Hansen tests of exogeneity of instrument subsets:
GMM instruments for levels
Hansen test excluding group:     chi2(184)  = 216.29  Prob > chi2 =  0.052
Difference (null H = exogenous): chi2(20)   =  22.35  Prob > chi2 =  0.322
iv(l1_xinter4 l1_minter4 y90 y91 y92 y93 y94 y95 y96 y97 y98 y99 y00 y01 y02 y03 y04 y05 y06 y07, eq(level))
Hansen test excluding group:     chi2(193)  = 227.63  Prob > chi2 =  0.045
Difference (null H = exogenous): chi2(11)   =  11.00  Prob > chi2 =  0.443

Caleb

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