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| From | "Justina Fischer" <JAVFischer@gmx.de> |
| To | statalist@hsphsun2.harvard.edu |
| Subject | Re: Antwort: Re: Antwort: Re: RE: st: Spurious inference from endogeneity tests |
| Date | Sat, 21 Jan 2012 01:34:33 +0100 |
HI Andreas, there are no 'right' instrumentsas such: there are only good ones (valid, strong) and bad ones. Imagine ´good´ and ´bad´ being on a continuous scale: most instruments are somwhere on this scale, but rarely at the extreme. now to the Sargan: "The Sargan test statistic [...] [is] under the null that the error term is uncorrelated with the instruments." source: http://en.wikipedia.org/wiki/Instrumental_variable so you want a p-value > 0.10 no rejection is what you want: the null means you have good instruments. I recommend to use ivreg2 whih allows you to test the redundany of instruments. Best Justina -------- Original-Nachricht -------- > Datum: Fri, 20 Jan 2012 21:22:54 +0100 > Von: andreas.zweifel@uzh.ch > An: statalist@hsphsun2.harvard.edu > Betreff: Antwort: Re: Antwort: Re: RE: st: Spurious inference from endogeneity tests > Hi > > I think you are quite right, and my intuition also tells me something > else. Let's assume I have only one endogenous regressor, > but more than one instrument candidates since there is no theoretical > foundation for choosing the 'right' instruments for the > endogenous variable. If I include all of these instruments and the > -overid- test statistic is still not significant, there is > likely something wrong with the instruments. This is because theory claims > that one instrument should suffice here, and each > additional instrument included merely increases the standard deviation of > the IV estimator. As a consequence, the model must > be overidentified from a theoretical view. However, if the Sargan test > fails to detect overidentification, this can only be > due to the fact that the selected instruments are quite weak... > > Best, > Andreas > > -----owner-statalist@hsphsun2.harvard.edu schrieb: ----- > An: statalist@hsphsun2.harvard.edu > Von: "Justina Fischer" > Gesendet von: owner-statalist@hsphsun2.harvard.edu > Datum: 19.01.2012 23:22 > Betreff: Re: Antwort: Re: RE: st: Spurious inference from endogeneity > tests > > nope.. the bias could turn the direction of observed influence - how do > you know then which one is correct (OLS or IV)? > > Rule of thumb is: better no instrument (OLS) than weak ones !! > > it is sufficient to provide good convincing arguments why you selected the > instruments; there is no need for theoretical models suggesting the > instrument explicitly. Let your phantasy work ! > > Cheers > Justina > > -------- Original-Nachricht -------- > > Datum: Thu, 19 Jan 2012 23:00:00 +0100 > > Von: andreas.zweifel@uzh.ch > > An: statalist@hsphsun2.harvard.edu > > Betreff: Antwort: Re: RE: st: Spurious inference from endogeneity tests > > > Thanks for this clarifying remark. > > > > In addition, literature always stresses the requirement that > > IVs should be selected in line with theoretically motivated > > arguments. But economic theory may sometimes be limited in its > > capability to yield valid instruments. However, when instruments > > are therefore weak, I expect the bias of the IV estimator to be > > similarly large as the OLS estimator. Maybe then it would make > > sense to prefer one of the two estimators in terms of theory > > driven expectations as the lesser evil? > > > > -----owner-statalist@hsphsun2.harvard.edu schrieb: ----- > > An: statalist@hsphsun2.harvard.edu > > Von: Austin Nichols > > Gesendet von: owner-statalist@hsphsun2.harvard.edu > > Datum: 18.01.2012 16:37 > > Betreff: Re: RE: st: Spurious inference from endogeneity tests > > > > In re > > the poster's central question: > > "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?" > > I would answer yes. Without better instruments, you have learned > > nothing from 2SLS, including whether OLS is biased or not. The overID > > test is no good if you don't have strong instruments, since its > > failure to reject the overID restrictions could be due merely to the > > weakness of your excluded instruments. > > > > On Tue, Jan 17, 2012 at 6:44 PM, Justina Fischer <JAVFischer@gmx.de> > > wrote: > > > wow. I am deeply impressed :-) > > > > > > Let us hope the authors provide user-written Stata commands soon.... > > > > > > justina > > > -------- Original-Nachricht -------- > > >> Datum: Tue, 17 Jan 2012 18:41:27 -0500 > > >> Von: Cameron McIntosh <cnm100@hotmail.com> > > >> An: STATA LIST <statalist@hsphsun2.harvard.edu> > > >> Betreff: RE: st: Spurious inference from endogeneity tests > > > > > >> The following papers will also be helpful: > > >> Murray, M.P. (2006). Avoiding Invalid Instruments and Coping with > Weak > > >> Instruments. Journal of Economic Perspectives, 20(4), > > >> > > > 111-132.http://www.eui.eu/Personal/Guiso/Courses/Econometrics/Murray_IV_jep_06.pdf > > >> > > >> Chao, J.C., & Swanson, N.R. (2005). Consistent estimation with a > large > > >> number of weak instruments. Econometrica, 73(5), > > >> > > > 1673–1692.http://gemini.econ.umd.edu/jrust/econ623/files/chao_swanson_econometrica.pdf > > >> > > >> Nevo, A., & Rosen, A.M. (2010). Identification with Imperfect > > Instruments. > > >> The Review of Economics and Statistics, Accepted for publication. > > >> > > >> Kolesár, M., Chetty, R., Friedman, J.N., Glaeser, E.L., & Imbens, > G.W. > > >> (October 2011). Identification and Inference with Many Invalid > > Instruments. > > >> NBER Working Paper No. 17519. http://www.nber.org/papers/w17519 > > >> > > >> Cam > > >> > Date: Wed, 18 Jan 2012 00:06:34 +0100 > > >> > From: JAVFischer@gmx.de > > >> > Subject: Re: st: Spurious inference from endogeneity tests > > >> > To: statalist@hsphsun2.harvard.edu > > >> > > > >> > 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? > > > > * > > * 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/ > > * > > * 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/ > * > * 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/