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From |
"Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk> |

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

Subject |
st: RE: Interpreting Kleibergen Paap weak instrument statistic |

Date |
Mon, 25 Jun 2012 12:10:46 +0100 |

James, > -----Original Message----- > From: owner-statalist@hsphsun2.harvard.edu > [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of > Fitzgerald, James > Sent: 21 June 2012 14:02 > To: statalist@hsphsun2.harvard.edu > Subject: st: Interpreting Kleibergen Paap weak instrument statistic > > Hi Statalist users > > I am using xtivreg2 to estimate a GMM-IV model (I specify the > following options; fe robust bw(2) gmm2s). I am not assuming > i.i.d errors, and thus when testing for weak instruments I am > using the Kleibergen Paap rk wald F statistic rather than the > Cragg Donald wald F statistic. > > xtivreg2 produces Stock-Yogo critical values for the Cragg > Donald statistic assuming i.i.d errors, so I'm not sure how > to interpret the KP rk wald F stat. > > The help file for ivreg2 (Baum, Schaffer and Stillman, 2010) > does however mention the following: > > When the i.i.d. assumption is dropped and ivreg2 is invoked > with the robust, bw or cluster options, the > Cragg-Donald-based weak instruments test is no longer valid. > ivreg2 instead reports a correspondingly-robust > Kleibergen-Paap Wald rk F statistic. The degrees of freedom > adjustment for the rk statistic is (N-L)/L1, as with the > Cragg-Donald F statistic, except in the cluster-robust case, > when the adjustment is N/(N-1) * (N_clust-1)/N_clust, > following the standard Stata small-sample adjustment for > cluster-robust. In the case of two-way clustering, N_clust is > the minimum of N_clust1 and N_clust2. The critical values > reported by ivreg2 for the Kleibergen-Paap statistic are the > Stock-Yogo critical values for the Cragg-Donald i.i.d. case. > The critical values reported with 2-step GMM are the > Stock-Yogo IV critical values, and the critical values > reported with CUE are the LIML critical values. > > > My understanding of the end of the paragraph is that the KP > stat can still be compared to the Stock-Yogo values produced > by STATA in determining whether or not instruments are weak. > > If someone could confirm or reject this I would be eternally > grateful!! I wrote that paragraph, so the ambiguity is partly my fault. But the problem is that there are no concrete results in the literature for testing for weak IVs when the i.i.d. assumption fails. The only thing one can do (that I'm aware of, anyway) is to point to stats that have an asymptotic justification in a test of underidentification, which is what the output of -ivreg2- does. That is, the K-P stat can be used to test for underidentification without the i.i.d. assumption, and under i.i.d. it has the same distribution under the null as the Cragg-Donald stat. This justification is different from that underlying the Stock-Yogo critical values, so this is pretty hand-wavey. The alternative is weak-instrument-robust estimation, a la Anderson-Rubin, Moreira, Kleibergen, etc. The Finlay-Magnusson -rivtest- command, available via ssc ideas in the usual way, supports this. Also see their accompanying SJ paper (vol. 9 no. 3). The command doesn't directly support panel data estimation, which is what you have, but you could just demean your variables by hand. HTH, Mark > Best wishes > > James Fitzgerald > * > * 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/ > -- Heriot-Watt University is the Sunday Times Scottish University of the Year 2011-2012 Heriot-Watt University is a Scottish charity registered under charity number SC000278. * * 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**:**st: RE: RE: Interpreting Kleibergen Paap weak instrument statistic***From:*"Fitzgerald, James" <J.Fitzgerald2@ucc.ie>

**References**:**st: Interpreting Kleibergen Paap weak instrument statistic***From:*"Fitzgerald, James" <J.Fitzgerald2@ucc.ie>

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