From "Lee, Seung-Won (MU-Student)" <[email protected]> To [email protected] Subject st: Q about xtabond2 Date Tue, 23 Sep 2008 00:45:14 -0500

```Hello

I ran xtabond2 on my model only to find that all regressors were dropped except one because of

collinearity.

I'm a beginner of xtabond2, and I don't know how to solve this problem.

As far as I know, there is no collinearity between regressors in my model.

Please see my log below and help me.

. xtabond2 dik l1_dik dsk l1_xinter4 l1_minter4 y9* y0*, gmm(l1_dik dls) iv(l1_xinter4 l1_minter4 y9* y0*) robust twostep
Favoring speed over space. To switch, type or click on mata: mata set matafavor space, perm.
dsk dropped due to collinearity
l1_xinter4 dropped due to collinearity
l1_minter4 dropped due to collinearity
y90 dropped due to collinearity
y91 dropped due to collinearity
y92 dropped due to collinearity
y93 dropped due to collinearity
y94 dropped due to collinearity
y95 dropped due to collinearity
y96 dropped due to collinearity
y97 dropped due to collinearity
y98 dropped due to collinearity
y99 dropped due to collinearity
y00 dropped due to collinearity
y01 dropped due to collinearity
y02 dropped due to collinearity
y03 dropped due to collinearity
y04 dropped due to collinearity
y05 dropped due to collinearity
y06 dropped due to collinearity
y07 dropped due to collinearity
Warning: Two-step estimated covariance matrix of moments is singular.
Using a generalized inverse to calculate optimal weighting matrix for two-step estimation.
Difference-in-Sargan statistics may be negative.
Dynamic panel-data estimation, two-step system GMM
------------------------------------------------------------------------------
Group variable: gvkey                           Number of obs      =      3630
Time variable : year                            Number of groups   =       874
Number of instruments = 218                     Obs per group: min =         2
Wald chi2(0)  =         .                                      avg =      4.15
Prob > chi2   =         .                                      max =        10
------------------------------------------------------------------------------
|              Corrected
dik |      Coef.   Std. Err.      z    P>|z|     [95% Conf. Interval]
-------------+----------------------------------------------------------------
l1_dik |  -3.51e-16   6.35e-16    -0.55   0.581    -1.59e-15    8.93e-16
_cons |  -.0138521   .0035552    -3.90   0.000    -.0208202    -.006884
------------------------------------------------------------------------------
Instruments for first differences equation
Standard
D.(l1_xinter4 l1_minter4 y90 y91 y92 y93 y94 y95 y96 y97 y98 y99 y00 y01
y02 y03 y04 y05 y06 y07)
GMM-type (missing=0, separate instruments for each period unless collapsed)
L(1/.).(l1_dik dls)
Instruments for levels equation
Standard
_cons
l1_xinter4 l1_minter4 y90 y91 y92 y93 y94 y95 y96 y97 y98 y99 y00 y01 y02
y03 y04 y05 y06 y07
GMM-type (missing=0, separate instruments for each period unless collapsed)
D.(l1_dik dls)
------------------------------------------------------------------------------
Arellano-Bond test for AR(1) in first differences: z =  -7.04  Pr > z =  0.000
Arellano-Bond test for AR(2) in first differences: z =  -0.80  Pr > z =  0.422
------------------------------------------------------------------------------
Sargan test of overid. restrictions: chi2(216)  = 714.97  Prob > chi2 =  0.000
(Not robust, but not weakened by many instruments.)
Hansen test of overid. restrictions: chi2(216)  = 270.06  Prob > chi2 =  0.007
(Robust, but can be weakened by many instruments.)
Difference-in-Hansen tests of exogeneity of instrument subsets:
GMM instruments for levels
Hansen test excluding group:     chi2(196)  = 225.55  Prob > chi2 =  0.073
Difference (null H = exogenous): chi2(20)   =  44.51  Prob > chi2 =  0.001
gmm(l1_dik dls, lag(1 .))
Hansen test excluding group:     chi2(10)   =  42.59  Prob > chi2 =  0.000
Difference (null H = exogenous): chi2(206)  = 227.47  Prob > chi2 =  0.146
iv(l1_xinter4 l1_minter4 y90 y91 y92 y93 y94 y95 y96 y97 y98 y99 y00 y01 y02 y03 y04 y05 y06 y07)
Hansen test excluding group:     chi2(205)  = 249.65  Prob > chi2 =  0.018
Difference (null H = exogenous): chi2(11)   =  20.41  Prob > chi2 =  0.040

Caleb

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