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st: xtlsdvc; Sargan test and heteroscedasticity


From   Magnus Gulbrandsen <magnus.a.gulbrandsen@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: xtlsdvc; Sargan test and heteroscedasticity
Date   Wed, 4 Jan 2012 09:11:02 +0100

Hi,

I am running a FE regression with LDV, and thus need to correct for
the possible Hurwicz bias. I use the -xtlsdvc- command, with option on
initial regression -initial(ab)- . After the regressions I have a few
quandaries:

1) The Sargan test comes out:

                     Sargan test of over-identifying restrictions:
                    chi2(54) =   185.87      Prob > chi2 = 0.0000

and if I am correct, this means in plain words that the instruments in
the Arrelano-Bond estimation (i.e. first step regression) are not
valid(correct?). If so, does this
mean that the estimates in the LSDVC regressions also are wrong? Are
there any solutions to this problem?

2) Econometricians seem to agree that as time observations (T)
increases the Hurwicz bias becomes negligible, but identify different
number of T where this is the case (ranging from about 10 to 20). Thus, my
dataset, where T=12, is a border case. The question is: If the z-values and the
different coefficients are only marginally different in the pure
FE+LDV approach and the LSDVC approach with bootstrapped standard
errors, should I
take this as a sign that the Hurwicz bias is so small that I just as
well can carry on with the FE+LDV model?

3) I would like to test for between-group and within-group
heteroskedasticity. After -xtreg, fe- (with LDV),  -xttest3- indicates
group-wise heteroscedasticity, even
when using robust/cluster standard errors (-vce(robust)- or
-vce(cluster clusterid)-). Any suggestions to how this can be
corrected? And, how can i check for within-group heteroscdasticity?
Are there any parallel tests for
after the -xtlsdvc- command?

All responense will be greatly appreciated.


Best regards,



Magnus Gulbrandsen

Magnus Gulbrandsen


Magnus Gulbrandsen

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