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RE: st: RE: a question about option orthog for command ivreg2
Jian Zhang,
> -----Original Message-----
> From: Jian Zhang [mailto:[email protected]]
> Sent: Sunday, August 20, 2006 4:16 AM
> To: Schaffer, Mark E; [email protected]
> Subject: RE: st: RE: a question about option orthog for
> command ivreg2
>
>
> Thanks, Mark! But when I run ivreg2 (using the updated
> version), the results reported that (right after the first
> stage regression results):
>
> Error: estimated covariance matrix of moment conditions not
> of full rank;
> overidentification statistic not reported, and
> standard errors and
> model tests should be interpreted with caution Possible causes:
> singleton dummy variable (dummy with one 1 and N-1 0s
> or vice versa)
> -fwl- option may address problem. See help ivreg2.
>
> It stated "overidentification statistics nor reported".
> However at the end of the second stage regression, it showed
> IN FACT the value of the Hansen J statistic
> (overidentification test of all instruments). Why did STATA
> report overidentification statistics after it already stated
> "overidentification statistics nor reported"? This seems
> inconsistent.
The error message appears within the first-stage regression results,
right? Then it refers to the first-stage regression results, not the
main results. You are right to point out that this is inconsistent. It
arises because ivreg2 is called recursively to do the first-stage
regression, in which (of course) there are never any overidentification
stats reported.
Probably we should fix this.
> Also if estimated covariance matrix of moment conditions is
> not of full rank, will we not be able to obtain estimates of
> GMM? It seems to me that if this matrix is not of full rank,
> this means that we could not get the weighted matrix (since
> the weighted matrix is the inverse of estimated covariance
> matrix of moment conditions). Is this right?
Right. Again explained by this relating to the first stage regressions,
not the main eqn.
> In addition, I have been trying the examples provided at the
> end of the documentation for ivreg2 using the Griliches data.
> It seems that there is a problem on the consistencies of the
> results from different overidentifiying restriction testings.
>
> First I run regression:
>
> ivreg2 lw s expr tenure rns smsa _I* (iq=med kww age mrt),
> gmm orthog(age mrt)
>
> The Hansen J statistic indicated that instruments med kww age
> and mrt are not valid (i.e., correlated with the error
> term). The C statatistic indicated that the subset of
> instruments age and mrt are not valid. However, when I run
> the following regression:
>
> ivreg2 lw s expr tenure rns smsa _I* (iq=age mrt), gmm
>
> the Hansen J statistic indicated that instruments age and mrt
> are valid. It seems that two sets of regressions gave
> inconsistent results on the validity of instruments age and
> mrt. Why does this
> happen? Which result should we trust?
Roughly speaking, med and kww identify a different parameter value for
the coefficient on iq vs. the one identified by age and mrt. Which one
you believe depends on other information: your priors, or strength of
identification, or whatever. For example, you might have a priori
doubts about whether a variable is a plausible instrument, or you might
put more weight on the med-kww results because age-mrt are weak
instruments, or....
Cheers,
Mark
> I found your emaill
> response to someone else in 2004 in
> the statalist but could not really find an answer to this
> from your email response. Many thanks!
>
> Best regards,
> Jian Zhang
>
>
>
>
>
>
>
> > Jian Zhang,
> >
> > > -----Original Message-----
> > > From: [email protected]
> > > [mailto:[email protected]] On Behalf Of Jian
> > > Zhang
> > > Sent: 18 August 2006 21:23
> > > To: [email protected]
> > > Subject: st: a question about option orthog for command ivreg2
> > >
> > > Dear Statalisters,
> > >
> > > I am using ivreg2 command to implement GMM estimation on a panel
> > > data set. I specified option orthog( ) to examine if a
> subset of my
> > > instruments are really exogenous (by putting the list of
> the subset
> > > of instruments in the parentheses of orthog). However,
> the results
> > > reported by STATA say
> > > that:
> > >
> > > Collinearity/identification problems in restricted equation:
> > > C statistic not calculated for orthog option
> >
> > First, you should check that you are using the latest version of
> > -ivreg2-; I think the wording of this error message is from
> an earlier
> > version. The problem with the wording is that when the subset of
> > instruments is tested, the equation is, if anything, better
> described
> > as UNrestricted - because the variables listed are no
> longer "restricted"
> > to being assumed exogenous.
> >
> > Anyway... after you update, you can find out what is going on by
> > estimating the 2nd equation by hand. Put the instruments listed in
> > orthog() in either the list of endogenous regressors (if they were
> > exogenous regressors in the original eqn), or omit them
> entirely (if
> > they were excluded instruments in the original eqn). FWIW,
> my guess
> > is that the 2nd equation is either exactly identified or
> unidentified.
> >
> > 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: [email protected]
> > web: http://www.sml.hw.ac.uk/ecomes
> >
> > > Is there anyone knowing what is going on? Since STATA
> has reported
> > > the estimates of the restricted equation(i.e., the
> regression using
> > > the entire set of instruments (overidentifying
> restrictions)), why
> > > did STATA still state "collinearity/idenfification problems in
> > > restricted equation"? Many thanks!
> > >
> > > Best regards,
> > > Jian Zhang
> > >
> > >
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> > >
> > >
> >
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> >
>
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