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st: RE: Interpretation of Smith-Blundell exog. test
Ivar,
> -----Original Message-----
> From: [email protected]
> [mailto:[email protected]] On Behalf Of
> Ivar Pettersen
> Sent: 18 April 2006 02:53
> To: [email protected]
> Subject: st: Interpretation of Smith-Blundell exog. test
>
> Hello.
>
> I've got a Q related to the interpretation of the Smith-Blundell test.
> It is provided both by *ivprobit* and *probexog*.
> The help file for probexog states "A rejection indicates that
> the standard probit (tobit) estimator should not be employed."
> So if rejected one should use an IV-technique.
>
> When the test is run it is necessary to provide some
> instruments. The question is: would not a rejection also mean
> that the instruments you have provided are not good enough in
> an IV-estimation?
In fact, for the test to be valid, you have to assume that the
instruments *are* good enough for an IV estimation. The test is a test
of the exogeneity of the specified regressor. If you reject, it means
you need to treat it as endogenous and therefore instrument; if you fail
to reject, it means you can consider treating it as exogenous.
Maybe you are thinking of a test of overidentifying restrictions.
That's a test of the exogeneity of the instruments; a rejection there
means the instruments are not valid.
HTH.
--Mark
> Sincerely
> Ivar Pettersen
>
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