Bookmark and Share

Notice: On March 31, it was announced that Statalist is moving from an email list to a forum. The old list will shut down on April 23, and its replacement, is already up and running.

[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

st: Validity of endogeneity test with weak instruments

From   "Lim Boon Leong" <>
To   <>
Subject   st: Validity of endogeneity test with weak instruments
Date   Mon, 8 Mar 2010 17:29:30 +0800

This is a multipart message in MIME format.

Dear Statalists,


I have five suspected endogenous regressors in a regression equation and I
have also identified a set of excluded instruments for these endogenous
regressors.  I use xtivreg2 to run the regression analysis and the test
results are as shown below: 



Underidentification test (Kleibergen-Paap rk LM statistic):

                                                   Chi-sq(7) P-val =



Weak identification test (Cragg-Donald Wald F statistic):


                         (Kleibergen-Paap rk Wald F statistic):


Stock-Yogo weak ID test critical values:                       <not



Hansen J statistic (overidentification test of all instruments):

                                                   Chi-sq(6) P-val =


The test results show that there is the problem of under identification and
the instruments are weak.  Nevertheless, the Hansen J statistic shows that
these instruments are valid/do not correlate with the error terms.


Next I carry out the endogeneity test to examine whether these five
suspected regressors are truly endogenous.  I use the endog(varlist_en)
option of xtivreg2 to carry out the test.  The test results are as shown


-endog- option:


Endogeneity test of endogenous regressors:

                                                   Chi-sq(5) P-val =

Regressors tested:    ownexr ownex2r ownex3r L.ldiv L.debt


Instrumented:         ownexr ownex2r ownex3r L.ldiv L.debt

Included instruments: ceodual ined remcom1 extblock1 L.lmktbk L.roa L.ret

                      L.ltotasset yr04 yr05 yr06

Excluded instruments: lrisk lsale lsale2 ks ks2 ys ik L2.ldiv L.roe


Dropped collinear:    yr02 yr03 yr07



The test results show that these suspected regressors can actually be
treated as exogenous.  


My question is with the presence of weak instruments, are the above
endogeneity test results still valid and reliable?


Thank you in advance.


Best regards,

Boon Leong 

*   For searches and help try:

© Copyright 1996–2016 StataCorp LP   |   Terms of use   |   Privacy   |   Contact us   |   Site index