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Fwd: st: RE: C statistics with IVREG2


From   Rosaria Vega Pansini <rosariavega.pansini@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Fwd: st: RE: C statistics with IVREG2
Date   Wed, 18 Dec 2013 15:32:08 +0100

Mark, thank you very much for you help.

Rosaria



On 16 December 2013 20:12, Schaffer, Mark E <M.E.Schaffer@hw.ac.uk> wrote:
>
> Rosaria,
>
> > -----Original Message-----
> > From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-
> > statalist@hsphsun2.harvard.edu] On Behalf Of Rosaria Vega Pansini
> > Sent: 16 December 2013 17:12
> > To: statalist@hsphsun2.harvard.edu
> > Subject: st: C statistics with IVREG2
> >
> > Hi all,
> > I'm trying to compare two IV models with different instruments, one of
> > them suspected endogenous.
> > We compared Sargan stats calcultated over the two models: the first
> > with the full set of instruments and the second excluding the
> > suspected endogenous instrument.
> > The results appears to be different to those obtained  including the
> > orthog  option in IVREG2 command.
> >
> > As an example, here are the two models we are comparing;
> >
> > Model 1:
> > ivreg2 hours educ  age kidslt6 kidsge6 nwifeinc (lwage=exper expersq
> > motheduc)
> > Sargan statistic (overidentification test of all instruments): 3.716
> >
> > Model 2:
> > ivreg2 hours educ  age kidslt6 kidsge6 nwifeinc,gmm (lwage=exper expersq)
> > Sargan statistic (overidentification test of all instruments): 0.858
> > J1-J2= 2.858
> >
> > Model 3:
> > ivreg2 hours educ  age kidslt6 kidsge6 nwifeinc  (lwage=exper
> > expersq motheduc), orthog(motheduc)
> >
> > C statistic (exogeneity/orthogonality of suspect instruments): 2.625
> >
> > Can anyone help in explaining this difference, i.e. the difference
> > between the C-statistics (model 3) and the (simple) difference between
> > the two Sargan statistics (Model 1 - Model 2)?
>
> The explanation is buried deep in the -ivreg2- help file:
>
> "To guarantee that the C statistic is non-negative in finite samples, the estimated covariance matrix of the full set orthogonality conditions is used to calculate both Sargan-Hansen statistics (in the case of simple IV/2SLS, this amounts to using the MSE from the unrestricted equation to calculate both Sargan statistics). ... For further discussion, see Hayashi (2000), pp. 218-22 and pp. 232-34."
>
> If you do it by hand using the difference between the two Sargan stats, as you did, you aren't guaranteed to get a non-neg stat in finite samples.
>
> For another illustration of this trick, have a look at the sigmamore and sigmaless options of the -hausman- command.
>
> HTH,
> Mark
>
>
>
> >
> > Thank you very much for your help
> > Rosaria
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