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RE: st: RE: Diagnostic results of ivreg2
"Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
RE: st: RE: Diagnostic results of ivreg2
Thu, 29 Mar 2012 11:48:13 +0100
> -----Original Message-----
> From: firstname.lastname@example.org
> [mailto:email@example.com] On Behalf Of
> Abekah Nkrumah
> Sent: 29 March 2012 01:22
> To: firstname.lastname@example.org
> Subject: Re: st: RE: Diagnostic results of ivreg2
> Dear Mark,
> Thank you very much for your mail. Yes what i meant was that
> the test failed to reject the null hypothesis that the
> regressor is exogenous.
> If i do get your argument, your point is that I may be better
> of interpreting the consistent but biased IV estimates
> compared to the precise but possibly inconsistent OLS.
It comes down to you, really - you could justify either choice.
> But is it possible that the failure to reject the null that
> the regressor is endogenous could be symptoms of weak
> instruments? which could make the biase in the IV estimates
> bigger than the OLS.
You're right that the endogeneity text presumes a contrast between a well-specified IV estimate vs. an OLS estimate.
But your previous email said that the specification tests you used implied that your instruments are not weak, which suggests you may not have to worry a lot about this.
> Thank you very much and will appreciate your thoughts on this.
> On Thu, Mar 29, 2012 at 12:13 AM, Schaffer, Mark E
> <M.E.Schaffer@hw.ac.uk> wrote:
> > Gordon,
> > Can you explain what you mean when you say "However the test of
> > endogeneity fails"? Do you mean that you fail to reject
> the null that
> > the regressor is exogenous?
> > That just means that there's no significant difference
> between your IV
> > and OLS estimates of the coefficient. A reason to be
> careful here is
> > if the IV estimate is not very precise, i.e., the SE is
> large, and you
> > have good prior reasons to think that the coefficient is
> > If that's the case, then you may well be better off with
> the imprecise
> > but consistent estimator (IV) than with the (apparently)
> precise but
> > inconsistent estimator. On the other hand, you could probably also
> > construct an argument that goes the other way on MSE or similar
> > grounds, i.e., you're willing to accept some (asymptotic) bias in
> > exchange for an estimator with a smaller variance.
> > --Mark
> >> -----Original Message-----
> >> From: email@example.com
> >> [mailto:firstname.lastname@example.org] On Behalf Of Abekah
> >> Nkrumah
> >> Sent: 28 March 2012 13:47
> >> To: email@example.com
> >> Subject: st: Diagnostic results of ivreg2
> >> Hi All,
> >> I am running an IV for a continuous dependent variable. The
> >> endogenous variable is also continuous so am using the use-written
> >> ivreg2 command and I correct for intra-cluster correlation
> by using
> >> the cluster robust option. My first-stage results suggest that the
> >> following diagnostic tests are fine: (1)
> underidentification test via
> >> Kleibergen Paap Wald statistsic (2) overidentification
> test via the
> >> Hansen J statistic (3) weak instrument test via the Crag-Donald
> >> F-statistic and the Stock-Yogo relative bias thresholds (4) The F
> >> statistic for the joint significance of the instruments in
> the first
> >> stage is also more than 10 for purposes of Staiger and
> Stoke's rule
> >> (5) Weak instrument robust test via the Anderson -Rubin wald test.
> >> However the test of endogeneity fails, suggesting that the
> >> regressor is not endogenous. I am however optimistic from a
> >> theoretical perceptive that the purported endogenous regressor is
> >> indeed endogenous. I am not too sure what may be happening? Could
> >> this be taken as symptoms of weak or invalid instruments
> even though
> >> it passes all the relevant statistical test? I will
> appreciate your
> >> help
> >> Gordon
> >> *
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> >> * http://www.ats.ucla.edu/stat/stata/
> > --
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> University of the
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Heriot-Watt University is the Sunday Times
Scottish University of the Year 2011-2012
We invite research leaders and ambitious early career
researchers to join us in leading and driving research
in key inter-disciplinary themes. Please see
for further information and how to apply.
Heriot-Watt University is a Scottish charity
registered under charity number SC000278.
* For searches and help try: