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st: XTIVREG2: Are my instruments proper?
From
"Ayesha Malhotra" <ayesha.malhotra@haskayne.ucalgary.ca>
To
"Ayesha Malhotra" <ayesha.malhotra@haskayne.ucalgary.ca>
Subject
st: XTIVREG2: Are my instruments proper?
Date
Mon, 26 Dec 2011 17:23:01 -0700 (MST)
Dear Statalist,
Happy Holidays!
I have two sets of results below. In the first fe regression, the main
endogenous variable "wlggluwmktsh" is a significant predictor and the
instruments are acceptable based on the 3 tests reported by xtivreg2.
In the second regression, I add year dummies. Now, the endogenous variable
is NOT significant and the 3 tests for valid/strong instruments are still
met.
I'm not clear why the regressor becomes insignificant in the second
regression. Isn't it the purpose of the first IV regression to account for
omitted variable issues?
Thanks in advance for your guidance.
Best wishes,
Ayesha
Ayesha Malhotra
Assistant Professor, Strategy & Global Management
Haskayne School of Business, University of Calgary
FIRST REGRESSION
. xtivreg2 wuwmktsh wlgrivalussh wlgrivalusshsq lgintmarg lglogassetsmd
lgsigmrg wlgassetgr lgassetdiversity wlgroa lgmnyctr (wlggluwmktsh
> wlgciussh=wlgsigfordep l.wlggluwmktsh l.lgciussh), fe cluster(entity)
Warning - singleton groups detected. 6 observation(s) not used.
FIXED EFFECTS ESTIMATION
------------------------
Number of groups = 77 Obs per group: miN= 2
avg =
11.2
max =
22
IV (2SLS) estimation
--------------------
Estimates efficient for homoskedasticity only
Statistics robust to heteroskedasticity and clustering on entity
Number of clusters (entity) = 77 Number of obs = 859
F( 11, 76) = 7.43
Prob > F = 0.0000
Total (centered) SS = 1417.794625 Centered R2 =
0.6587
Total (uncentered) SS = 1417.794625 Uncentered R2 =
0.6587
Residual SS = 483.9461722 Root MSE =
.7867
------------------------------------------------------------------------------
| Robust
wuwmktsh | Coef. Std. Err. z P>|z| [95% Conf.
Interval]
-------------+-------------------------------------------------------------wlggluwmktsh
| 1.090995 .086687 12.59 0.000 .9210911 260898
Other results removed...
------------------------------------------------------------------------------
Underidentification test (Kleibergen-Paap rk LM statistic): 10.050
Chi-sq(2) P-val = 0.0066
------------------------------------------------------------------------------
Weak identification test (Kleibergen-Paap rk Wald F statistic): 14.625
Stock-Yogo weak ID test critical values: 10% maximal IV size 13.43
15% maximal IV size 8.18
20% maximal IV size 6.40
25% maximal IV size 5.45
Source: Stock-Yogo (2005). Reproduced by permission.
NB: Critical values are for Cragg-Donald F statistic and i.i.d. errors.
------------------------------------------------------------------------------
Hansen J statistic (overidentification test of all instruments): 0.980
Chi-sq(1) P-val = 0.3221
------------------------------------------------------------------------------
Instrumented: wlggluwmktsh wlgciussh
Included instruments: wlgrivalussh wlgrivalusshsq lgintmarg lglogassetsmd
lgsigmrg wlgassetgr lgassetdiversity wlgroa lgmnyctr
Excluded instruments: wlgsigfordep L.wlggluwmktsh L.lgciussh
SECOND REGRESSION - HAS TIME DUMMIES
xtivreg2 wuwmktsh wlgrivalussh wlgrivalusshsq lgintmarg lglogassetsmd
lgsigmrg wlgassetgr lgassetdiversity wlgroa lgmnyctr yrdum1-yrdum23
> (wlggluwmktsh wlgciussh=wlgsigfordep l.wlggluwmktsh l.lgciussh), fe
cluster(entity)
Warning - singleton groups detected. 6 observation(s) not used.
Warning - collinearities detected
Vars dropped: yrdum1 yrdum23
FIXED EFFECTS ESTIMATION
------------------------
Number of groups = 77 Obs per group: min =
2
avg =
11.2
max =
22
IV (2SLS) estimation
--------------------
Estimates efficient for homoskedasticity only
Statistics robust to heteroskedasticity and clustering on entity
Number of clusters (entity) = 77 Number of obs =
859
F( 32, 76) =
6476.04
Prob > F =
0.0000
Total (centered) SS = 1417.794625 Centered R2 =
0.8120
Total (uncentered) SS = 1417.794625 Uncentered R2 =
0.8120
Residual SS = 266.5785924 Root MSE =
.5839
---------------------------------------------------------------------------
| Robust
wuwmktsh | Coef. Std. Err. z P>|z| [95% Conf.
Interval]
-------------+----------------------------------------------------------------
wlggluwmktsh | .0616593 .1000854 0.62 0.538 .1345045 .2578231
Some other results removed....
yrdum2 | -30.33265 2.549937 -11.90 0.000 -35.33044
-25.33487
yrdum3 | -30.94688 2.592648 -11.94 0.000 -36.02838
-25.86539
yrdum4 | -29.49283 2.483674 -11.87 0.000 -34.36075
-24.62492
yrdum5 | -29.74965 2.509561 -11.85 0.000 -34.6683
-24.83101
yrdum6 | -29.20278 2.466175 -11.84 0.000 -34.03639
-24.36916
yrdum7 | -28.2574 2.399218 -11.78 0.000 -32.95978
-23.55502
yrdum8 | -25.69739 2.217672 -11.59 0.000 -30.04395
-21.35083
yrdum9 | -21.18458 1.941362 -10.91 0.000 -24.98958
-17.37958
yrdum10 | -21.14397 1.959225 -10.79 0.000 -24.98398
-17.30396
yrdum11 | -19.71581 2.089331 -9.44 0.000 -23.81082
-15.6208
yrdum12 | -12.39363 1.355772 -9.14 0.000 -15.05089
-9.736362
yrdum13 | -9.591614 1.271486 -7.54 0.000 -12.08368
-7.099548
yrdum14 | -7.524386 .8318182 -9.05 0.000 -9.15472
-5.894053
yrdum15 | -7.845728 .8834701 -8.88 0.000 -9.577297
-6.114158
yrdum16 | -8.041389 .9002762 -8.93 0.000 -9.805898
-6.27688
yrdum17 | -8.088559 .9122472 -8.87 0.000 -9.87653
-6.300587
yrdum18 | -10.25239 1.067351 -9.61 0.000 -12.34436
-8.160416
yrdum19 | -11.51903 1.186703 -9.71 0.000 -13.84492
-9.193134
yrdum20 | -9.931895 1.189907 -8.35 0.000 -12.26407
-7.599721
yrdum21 | -4.975506 .7196383 -6.91 0.000 -6.385971
-3.565041
yrdum22 | -4.745704 .6567907 -7.23 0.000 -6.032991
-3.458418
------------------------------------------------------------------------------
Underidentification test (Kleibergen-Paap rk LM statistic): 11.455
Chi-sq(2) P-val = 0.0033
------------------------------------------------------------------------------
Weak identification test (Kleibergen-Paap rk Wald F statistic): 36.383
Stock-Yogo weak ID test critical values: 10% maximal IV size 13.43
15% maximal IV size 8.18
20% maximal IV size 6.40
25% maximal IV size 5.45
Source: Stock-Yogo (2005). Reproduced by permission.
NB: Critical values are for Cragg-Donald F statistic and i.i.d. errors.
------------------------------------------------------------------------------
Hansen J statistic (overidentification test of all instruments): 2.155
Chi-sq(1) P-val = 0.1421
------------------------------------------------------------------------------
Instrumented: wlggluwmktsh wlgciussh
Included instruments: wlgrivalussh wlgrivalusshsq lgintmarg lglogassetsmd
lgsigmrg wlgassetgr lgassetdiversity wlgroa lgmnyctr
yrdum2 yrdum3 yrdum4 yrdum5 yrdum6 yrdum7 yrdum8 yrdum9
yrdum10 yrdum11 yrdum12 yrdum13 yrdum14 yrdum15 yrdum16
yrdum17 yrdum18 yrdum19 yrdum20 yrdum21 yrdum22
Excluded instruments: wlgsigfordep L.wlggluwmktsh L.lgciussh
Dropped collinear: yrdum1 yrdum23
------------------------------------------------------------------------------
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