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st: Overidentifying Restrictions


From   Erasmo Giambona <e.giambona@gmail.com>
To   statalist <statalist@hsphsun2.harvard.edu>
Subject   st: Overidentifying Restrictions
Date   Mon, 27 Jul 2009 19:36:53 +0200

Dear Statalist,

I have a question regarding testing for overidentifying restrictions.
Typing "help ivreg2" in STATA, and then clicking "Testing
Overidentifying Restrictions" under "Contents" we get the following:
"The Sargan-Hansen test is a test of overidentifying restrictions.
The joint null hypothesis is that the instruments are valid
instruments, i.e., uncorrelated with the error term, and that the
excluded instruments are correctly excluded from the estimated
equation. "

My question is about the meaning of the joint null hypothesis. To me
is difficult to envision how the instrument being "uncorrelated with
the error term" is different from the "excluded instruments are
correctly excluded from the estimated equation".

Can somebody clarify this idea of the joint hypothesis and suggest a
reference where I could read more about it?

Thanks,

Erasmo
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