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From |
"Nirina F" <fstata@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: clarification on interpreting Stock&Yogo- maximal IV "size" |

Date |
Tue, 25 Sep 2007 11:27:41 -0400 |

Austin, so let me make sure with you with the info from my ivreg2 below that indeed my identification is strong as the CraggDonald F stat is above the critical values from OLS bias and that I am rejecting my hypothesis of weak instruments actually at 20%. Much thanks, Number of observations N = 728 Number of regressors K = 57 Number of instruments L = 109 Number of excluded instruments L1 = 53 Number of partialled-out regressors/IVs = 1 ------------------------------------------------------------------------------ Underidentification test (Anderson canon. corr. LM statistic): 607.412 Chi-sq(53) P-val = 0.0000 ------------------------------------------------------------------------------ Weak identification test (Cragg-Donald Wald F statistic): 58.734 Stock-Yogo weak ID test critical values: 5% maximal IV relative bias 21.30 10% maximal IV relative bias 11.10 20% maximal IV relative bias 5.86 30% maximal IV relative bias 4.07 10% maximal IV size 141.08 15% maximal IV size 72.44 20% maximal IV size 49.26 25% maximal IV size 37.65 Source: Stock-Yogo (2005). Reproduced by permission. ------------------------------------------------------------------------------ Sargan statistic (overidentification test of all instruments): 58.317 Chi-sq(52) P-val = 0.2544 ------------------------------------------------------------------------------ On 9/25/07, Austin Nichols <austinnichols@gmail.com> wrote: > Nirina F <fstata@gmail.com>: > The IV estimate is always biased, but is less biased than OLS to the > extent that identification is strong; in the limit of weak > instruments, there would be no improvement over OLS in terms of bias > and the bias would be 100% of OLS, and in the other limit, the bias > would be zero percent. Clearly, you'd like to know where you are on > that spectrum, even if only approximately. There is also a problem > with the size of tests after IV--you think you are rejecting a > hypothesis using a 5% alpha, but it is really 10% or 20%. Stock and > Yogo did simulations to provide "rule of thumb" critical values (or > rule of thumb "critical values" perhaps). Table 1 on page 39 of Stock > and Yogo (http://ksghome.harvard.edu/~jstock/pdf/rfa_6.pdf) shows the > value of the SY stat (a measure of the "strength of identification" or > the predictive power of the excluded instruments) to limit the bias to > 20% of OLS for two endogenous variables and three excluded instruments > (n=2, K2=5) is 5.91 (similar values are given to limit the size of > Wald tests in table 2, and stats for LIML estimates in tables 3 and > 4). > > It's not clear what you don't understand from the Stock and Yogo > paper, so it's hard to comment directly. If you gave your n and K2 > values and the SY stat from the output of -ivreg2- I suppose one could > describe directly the situation in which you find yourself. > > But the key point is that all IV and IV-type specifications suffer > from bias and size distortions, not to mention inefficiency and > sometimes failures of exclusion restrictions. The SY stat gives you > some measure of how strong your identification is in your sample, but > no information about the validity of your instruments. Hope you also > read BSS2007: > http://econpapers.repec.org/paper/bocbocoec/667.htm > and I expect -ranktest- will generate a new set of papers eventually > (-ssc install ranktest- and -help ranktest- for more). > > On 9/25/07, Nirina F <fstata@gmail.com> wrote: > > Dear all, > > > > Yes, I read > > Stock, J.H. and Yogo, M. 2005. " Testing for Weak Instruments in > > Linear IV Regression" > > > > but I still don't understand how do I interpret the critical values of > > the Stock&Yogo- maximal IV size when using ivreg2. > > > > I think I compare the critical values from x%maximal IV relative bias > > with the Cragg-Donald stat to test for weak instruments but the > > critical values for the size with what and what it means? > * > * For searches and help try: > * http://www.stata.com/support/faqs/res/findit.html > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ > * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**Re: st: clarification on interpreting Stock&Yogo- maximal IV "size"***From:*"Austin Nichols" <austinnichols@gmail.com>

**References**:**st: clarification on interpreting Stock&Yogo- maximal IV "size"***From:*"Nirina F" <fstata@gmail.com>

**Re: st: clarification on interpreting Stock&Yogo- maximal IV "size"***From:*"Austin Nichols" <austinnichols@gmail.com>

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