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Re: st: Negative LR test statistic ?

From   Maarten buis <>
Subject   Re: st: Negative LR test statistic ?
Date   Mon, 21 Dec 2009 15:07:34 -0800 (PST)

> --- On Mon, 21/12/09, Ekrem Kalkan wrote:
> > I am estimating  a system of 14 equations, each with
> > nearly 40 variables. I have also  20 excluded instruments. What
> > do you mean by "empty"model?  If you mean the model without
> > explanatory variables, there will be only 14 constant term to
> > be estimated. Is it too large?

--- I answered: 
> I am afraid that this could very well be the case. Think of it 
> this way: you have only a bit more than 60 observations per
> equation. 60 is OK but not great for linear regression, as it 
> is known to be robust, well behaved, and stable, but your are 
> realy pushing your luck when using such small sample sizes for 
> anything more complicated. This is especially true for anything 
> involving instrumental variables, these models can easily eat 
> huge amounts of statistical power. 

Let me add to that: 40 covariates would be way too much with only
60 observations, even for a linear regression. What you could do 
to get a feel for how much your data can take, is to do a power
analysis as described here:  

Hope this helps,

Maarten L. Buis
Institut fuer Soziologie
Universitaet Tuebingen
Wilhelmstrasse 36
72074 Tuebingen


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