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Re: st: negative R-squared in gmm

From   Christopher Baum <>
To   "" <>
Subject   Re: st: negative R-squared in gmm
Date   Sun, 25 Jul 2010 06:25:35 -0400

On Jul 25, 2010, at 2:33 AM, Jing wrote:

> I am using "xtivreg2 dep indep (indep=iv) , fe gmm bw (1) robust" to my data. but the centered and uncertered R-squared are both negative. Could you please advise me whether this is acceptable. if not, what are the potential problems, and how can I refine my model?

Negative r^2 measures in any instrumental variables estimation are quite common. IV does not minimize the sum of squared residuals (y- Xb ), but rather the sum of squared residuals (y - Zb). Using GMM, the same issue arises. And in a fixed effect model, there is no single definition of r^2 anyway.

By the way bw(1) in this context does absolutely nothing. If you want to allow for one period of serial dependence, you want bw(2). 


Kit Baum   |   Boston College Economics & DIW Berlin   |
                              An Introduction to Stata Programming  |
   An Introduction to Modern Econometrics Using Stata  |

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