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From |
"Justina Fischer" <JAVFischer@gmx.de> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: Spurious inference from endogeneity tests |

Date |
Wed, 18 Jan 2012 00:06:34 +0100 |

Hi Andreas for judging whether instruments are weak or not I would as first step look into the first stage regression results, look at the Shea R2, the F-test on the instruments, the single estimates....that tells you already a lot. Maybe use ivreg2. Maybe you have only one weak instrument in a set of instruments you should exclude (so the set is then strong, even though one single weak instrument may bias your results) Best Justina -------- Original-Nachricht -------- > Datum: Tue, 17 Jan 2012 22:12:36 +0100 > Von: andreas.zweifel@uzh.ch > An: statalist@hsphsun2.harvard.edu > Betreff: st: Spurious inference from endogeneity tests > Dear Statausers, > > I am concerned with an endogeneity problem in my sample of 126 firms when > investigating the relationship between managerial disclosure and cost of > capital effects. After running the ivreg28 command, the Cragg-Donald test > F-statistic is 2.27, which indicates that my instruments are rather weak. > However, my model appears to be correctly identified, because the Anderson test > statistic for the first stage equation yields a p-value lower than 0.01 > and the Sargan test statistic is insignificant (p-value = 0.59). Since my > instruments have passed the overidentification test, I run the ivendog command > which is equivalent to a Hausman test. Again, the test statistic is > insignificant (p-value = 0.48). > > If I compare OLS and 2SLS, I find that only the former yields a > significant coefficient of managerial disclosure in the model regressing cost of > capital on managerial disclosure. Considering the specification tests above, it > seems unlikely that 2SLS is an improvement over OLS. Thus I assume that I > can take the OLS estimates for causal inference. Is this correct? If yes, > the point why I should not use 2SLS is likely due to the weakness of the > instruments and the small-sample bias. So I have to conclude from my > specification tests that my coefficient estimates from both OLS and 2SLS cannot be > interpreted because 2SLS does not succeed in resolving the endogeneity > problem? > > Your answers will be highly appreciated. > > Thanks, Andreas > * > * For searches and help try: > * http://www.stata.com/help.cgi?search > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ -- Justina AV Fischer, PhD COFIT Fellow World Trade Institute University of Bern homepage: http://www.justinaavfischer.de/ e-mail: javfischer@gmx.de. justina.fischer@wti.org papers: http://ideas.repec.org/e/pfi55.html * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**RE: st: Spurious inference from endogeneity tests***From:*Cameron McIntosh <cnm100@hotmail.com>

**References**:**st: Spurious inference from endogeneity tests***From:*andreas.zweifel@uzh.ch

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