Notice: On April 23, 2014, Statalist moved from an email list to a forum, based at statalist.org.

# st: RE: GMM estimation: restricting parameter estimates

 From "Schaffer, Mark E" <[email protected]> To "[email protected]" <[email protected]> Subject st: RE: GMM estimation: restricting parameter estimates Date Wed, 5 Jun 2013 10:49:00 +0000

```Markus,

> -----Original Message-----
> From: [email protected] [mailto:owner-
> [email protected]] On Behalf Of [email protected]
> mannheim.de
> Sent: 29 May 2013 17:27
> To: [email protected]
> Subject: st: GMM estimation: restricting parameter estimates
>
> Dear Statalist Community,
>
> I have N moment conditions of the form E[m*R(i)]=0 where m=a+b*Rvw.
> Basically, it's a panel where i refers to firm i. Rvw is the return on a value-
> weighted portfolio. R(i) stores the returns for firm i's stock. The STATA code
> looks something like this:
>
> #delimit ;
>
> gmm (({a}+{b}*Rvw)*R1)
> (({a}+{b}*Rvw))*R2)
> (({a}+{b}*Rvw))*R3)
> , winitial(identity);
>
> #delimit cr
>
> a and b are the parameters which I would like to estimate. Now, what STATA
> does is it sets a=0 and b=0 and all N moment conditions are fullfilled.
> Obviously though, that is not the solution I am looking for.
>
> Does anybody now how I can restrict the parameter estimates such that
> a!=0 and b!=0 ?

(Apologies to you and list if someone has already answered.)

You could try a variation on a trick that is sometimes used in code to restrict the range of parameter values.  Instead of estimating a and b you could estimate 1/a and 1/b.  Or some other function that prevents Stata (not "STATA" btw) from deciding on exact zeros as solutions.

For an example of how official Stata code does something similar, have a look at the manual entry for -heckman- and in particular the discussion of how rho is estimated.

HTH,
Mark

>
> Thank you.
>
> Markus
>
>
>
>
>
>
>
> *
> *   For searches and help try:
> *   http://www.stata.com/help.cgi?search
> *   http://www.stata.com/support/faqs/resources/statalist-faq/
> *   http://www.ats.ucla.edu/stat/stata/

-----
Sunday Times Scottish University of the Year 2011-2013
Top in the UK for student experience
Fourth university in the UK and top in Scotland (National Student Survey 2012)

We invite research leaders and ambitious early career researchers to
join us in leading and driving research in key inter-disciplinary themes.
Please see www.hw.ac.uk/researchleaders for further information and how
to apply.

Heriot-Watt University is a Scottish charity
registered under charity number SC000278.

*
*   For searches and help try:
*   http://www.stata.com/help.cgi?search
*   http://www.stata.com/support/faqs/resources/statalist-faq/
*   http://www.ats.ucla.edu/stat/stata/
```