Stata: Data Analysis and Statistical Software

"If omega is scalar, then AEGMM = (Z_Z)â??1. Here the Hansen test coincides with the Sargan (1958) test. But if nonsphericity is suspected in the errors, as in robust one-step GMM, the Sargan statistic is inconsistent. Then a theoretically superior overidentification test for the one-step estimator is that based on the Hansen statistic from a two-step estimate. When the user requests the Sargan test for â??robustâ?? one-step GMM regressions, some software packages, including ivreg2 and xtabond2, therefore quietly perform the second GMM step to obtain and report a consistent Hansen statistic."


Eric de Souza 
College of Europe 
Brugge (Bruges), Belgium 
http://www.coleurope.eu



-----Original Message-----
From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Ruiqing Miao
Sent: 01 November 2013 14:43
To: statalist@hsphsun2.harvard.edu
Subject: st: RE: Is Hansen test in XTABOND2 really robust?

Dear Stata Users,

I am working on a project that involves dynamic panel data analysis. Since the manual of XTABOND states that the Sargan test is not valid in the presence of heteroskedasticity, I switch to XTABOND2 that presents Hansen test that is claimed to be robust. But I realized that for the same model, the statistic value of XTABONDâ??s two-step Sargan test is exactly equal to the value of XTABOND2â??s Hansen test; and the value of XTABONDâ??s one-step Sargan test is very close to the value of XTABOND2â??s Sargan test. 

In the manual of another software (page 168, the last paragraph, http://gretl.sourceforge.net/gretl-help/gretl-guide.pdf), it reads, â??Specifically, xtabond2 computes both a â??Sargan testâ?? and a â??Hansen testâ??
for overidentification, but what it calls the Hansen test is, apparently, what DPD calls the Sargan test. (We have had difficulty determining from the
xtabond2 documentation (Roodman, 2006) exactly how its Sargan test is computed.)â?? This may provide a support to my finding above.

So, I guess either the Stata manual about XTABOND or Mr Roodmanâ??s XTABOND2 has something unclear on this issue? If the Stata manual is correct (i.e., Sangan test is not robust), then is Hansen test, which is equal to Hansen test in two-step XTABOND, really robust?

On the manual for â??xtdpdsys postestimation â?? Postestimation tools for xtdpdsysâ??, page 107 in Stata 11, it reads,  â??Although performing the Sargan test after the two-step estimator is an alternative, Arellano and Bond
(1991) found a tendency for this test to underreject in the presence of heteroskedasticity.â?? What does this sentence mean? Why is it â??an alternativeâ??? Is the Sargan test after the two-step estimator robust?

Thank you very much for your help!

Ruiqing


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