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From |
Cameron McIntosh <cnm100@hotmail.com> |

To |
STATA LIST <statalist@hsphsun2.harvard.edu> |

Subject |
RE: st: Spurious inference from endogeneity tests |

Date |
Tue, 17 Jan 2012 18:41:27 -0500 |

The following papers will also be helpful: Murray, M.P. (2006). Avoiding Invalid Instruments and Coping with Weak Instruments. Journal of Economic Perspectives, 20(4), 111-132.http://www.eui.eu/Personal/Guiso/Courses/Econometrics/Murray_IV_jep_06.pdf Chao, J.C., & Swanson, N.R. (2005). Consistent estimation with a large number of weak instruments. Econometrica, 73(5), 1673–1692.http://gemini.econ.umd.edu/jrust/econ623/files/chao_swanson_econometrica.pdf Nevo, A., & Rosen, A.M. (2010). Identification with Imperfect Instruments. The Review of Economics and Statistics, Accepted for publication. Kolesár, M., Chetty, R., Friedman, J.N., Glaeser, E.L., & Imbens, G.W. (October 2011). Identification and Inference with Many Invalid Instruments. NBER Working Paper No. 17519. http://www.nber.org/papers/w17519 Cam > Date: Wed, 18 Jan 2012 00:06:34 +0100 > From: JAVFischer@gmx.de > Subject: Re: st: Spurious inference from endogeneity tests > To: statalist@hsphsun2.harvard.edu > > Hi Andreas > > for judging whether instruments are weak or not I would as first step look into the first stage regression results, look at the Shea R2, the F-test on the instruments, the single estimates....that tells you already a lot. Maybe use ivreg2. > > Maybe you have only one weak instrument in a set of instruments you should exclude (so the set is then strong, even though one single weak instrument may bias your results) > > Best > > Justina > > > -------- Original-Nachricht -------- > > Datum: Tue, 17 Jan 2012 22:12:36 +0100 > > Von: andreas.zweifel@uzh.ch > > An: statalist@hsphsun2.harvard.edu > > Betreff: st: Spurious inference from endogeneity tests > > > Dear Statausers, > > > > I am concerned with an endogeneity problem in my sample of 126 firms when > > investigating the relationship between managerial disclosure and cost of > > capital effects. After running the ivreg28 command, the Cragg-Donald test > > F-statistic is 2.27, which indicates that my instruments are rather weak. > > However, my model appears to be correctly identified, because the Anderson test > > statistic for the first stage equation yields a p-value lower than 0.01 > > and the Sargan test statistic is insignificant (p-value = 0.59). Since my > > instruments have passed the overidentification test, I run the ivendog command > > which is equivalent to a Hausman test. Again, the test statistic is > > insignificant (p-value = 0.48). > > > > If I compare OLS and 2SLS, I find that only the former yields a > > significant coefficient of managerial disclosure in the model regressing cost of > > capital on managerial disclosure. Considering the specification tests above, it > > seems unlikely that 2SLS is an improvement over OLS. Thus I assume that I > > can take the OLS estimates for causal inference. Is this correct? If yes, > > the point why I should not use 2SLS is likely due to the weakness of the > > instruments and the small-sample bias. So I have to conclude from my > > specification tests that my coefficient estimates from both OLS and 2SLS cannot be > > interpreted because 2SLS does not succeed in resolving the endogeneity > > problem? > > > > Your answers will be highly appreciated. > > > > Thanks, Andreas > > * > > * For searches and help try: > > * http://www.stata.com/help.cgi?search > > * http://www.stata.com/support/statalist/faq > > * http://www.ats.ucla.edu/stat/stata/ > > -- > Justina AV Fischer, PhD > COFIT Fellow > World Trade Institute > University of Bern > > homepage: http://www.justinaavfischer.de/ > e-mail: javfischer@gmx.de. justina.fischer@wti.org > papers: http://ideas.repec.org/e/pfi55.html > > > * > * For searches and help try: > * http://www.stata.com/help.cgi?search > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**Re: RE: st: Spurious inference from endogeneity tests***From:*"Justina Fischer" <JAVFischer@gmx.de>

**References**:**st: Spurious inference from endogeneity tests***From:*andreas.zweifel@uzh.ch

**Re: st: Spurious inference from endogeneity tests***From:*"Justina Fischer" <JAVFischer@gmx.de>

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