st: RE: Help needed in interpreting the C-statistics in -ivreg2, orthog-

[Bo MacInnis <bo@macinnis.org>]

Mark,

Thank you very much. You are right to point out the discrepancy 
between the model I referred to and the test statistics I cited. The 
model that corresponded to is:

ivreg2 y x2 (x1 = z1 z2 z3 z4 z5 z6) X, orthog(x2)

So, x2 "should" be modelled as "exogenous"?

Thank you!
Bo

At 05:53 PM 6/27/2006, Schaffer, Mark E wrote:

> Bo,
>
> > -----Original Message-----
> > From: Bo MacInnis [mailto:bo@macinnis.org]
> > Sent: 28 June 2006 01:39
> > To: statalist@hsphsun2.harvard.edu
> > Subject: Help needed in interpreting the C-statistics in
> > -ivreg2, orthog-
> >
> > Dear StataListers,
> >
> > I'd really appreciate if you would help me on a really simple
> > question about the -orthog- option in the -ivreg2- command.
> >
> > Suppose:
> >
> > ivreg y (x1 x2 = z1 z2) X
> >
> > Now I want to test whether x2 is endogenous. So I use:
> >
> > ivreg2 y x2 (x1 = z1 z2) X, orthog(x2)
> >
> > I get the following statitics:
> >
> > -orthog- option:
> > Hansen J statistic (eqn. excluding suspect orthog.
> > conditions):          4.559
> >                                                     Chi-sq(4)
> > P-val =    0.3356
> > C statistic (exogeneity/orthogonality of suspect
> > instruments):           1.865
> >                                                     Chi-sq(1)
> > P-val =    0.1720
> >
> > Question: Does it mean I fail to reject the null where the
> > null is that x2 is endogenous?
>
> That's right.  The first Hansen J stat is a test that the 4
> overidentifying restrictions are jointly valid.  The second J stat is a
> test that the one specified orthogonality condition is valid, i.e., the
> variable is exogenous.
>
> In your case, you find that the 4 overid restrictions are valid (so that
> you don't reject the null that they're invalid, i.e., they're OK), and
> that the one specified orthogonality condition is valid (so that you
> don't reject the null that that it's exogneous/valid).
>
> BTW, I assume the results you are reporting are not for the example
> above, since in the model estimated by
>
> ivreg2 y x2 (x1 = z1 z2) X, orthog(x2)
>
> there is only one overidentifying restriction, and so you don't have
> enough degrees of freedom to test the exogeneity of just x2 (roughly
> speaking, the C stat would have zero degrees of freedom).
>
> Cheers,
> Mark
>
> Prof. Mark Schaffer
> Director, CERT
> Department of Economics
> School of Management & Languages
> Heriot-Watt University, Edinburgh EH14 4AS
> tel +44-131-451-3494 / fax +44-131-451-3296
> email: m.e.schaffer@hw.ac.uk
> web: http://www.sml.hw.ac.uk/ecomes
>
> > Thank you so much,
> > Bo MacInnis
> >
> >
> >
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