st: xtivreg2: orthog option

["Fitzgerald, James" <J.Fitzgerald2@ucc.ie>]

Hi Statalist users,

I am estimating the following model in STATA 11.2:

xtivreg2 ltdbv lnsale tang itang itangdum tax prof mtb capexsa liq ndts yr* (=l.lnsale l.tang l.itang l.itangdum l.tax l.prof l.mtb l.capexsa l.liq l.ndts) if profsubs>0 & capexsasubs>0, fe cluster(firm) gmm2s

In order to ensure my excuded instruments are orthogonal, I use the orthog option to test the orthogonality of each excluded variable i.e. orthog(l.lnsale) and so on.

Once I have a set of excluded instruments that are orthogonal (say Hansen J Stat p-value >0.5000), I then test the orthogonality of each of my included instruments i.e. orthog(lnsale) and so on.

However, I am finding that the C-Stat for some of the included instruments depends on the set of excluded instruments, even though in each case the set of excluded instruments appears orthogonal. 

For example, when I run the following:

xtivreg2 ltdbv lnsale tang itang itangdum tax prof mtb capexsa liq ndts yr* (=l.itang l.prof l.mtb l.capexsa l.liq l.ndts) if profsubs>0 & capexsasubs>0, fe cluster(firm) gmm2s orthog(tang)

I get the following results in relation to orthogonality tests:

Hansen J statistic (Lagrange multiplier test of excluded instruments):   5.104 Chi-sq(6) P-val =    0.5306
-orthog- option:
Hansen J statistic (eqn. excluding suspect orthog. conditions):          0.853 Chi-sq(5) P-val =    0.9735
C statistic (exogeneity/orthogonality of suspect instruments):           4.250 Chi-sq(1) P-val =    0.0392
Instruments tested:   tang
Included instruments: lnsale tang itang itangdum tax prof mtb capexsa liq ndts
yr90 yr91 yr92 yr93 yr94 yr95 yr96 yr97 yr98 yr99 yr00
yr01 yr02 yr03 yr04 yr05 yr06 yr07
Excluded instruments: L.itang L.prof L.mtb L.capexsa L.liq L.ndts
Dropped collinear:    yr08

However, when I drop l.capexsa and l.liq from the set of excluded instruments I get:


Hansen J statistic (Lagrange multiplier test of excluded instruments):   0.970 Chi-sq(4) P-val =    0.9143
-orthog- option:
Hansen J statistic (eqn. excluding suspect orthog. conditions):          0.570 Chi-sq(3) P-val =    0.9033
C statistic (exogeneity/orthogonality of suspect instruments):           0.400 Chi-sq(1) P-val =    0.5271
Instruments tested:   tang
Included instruments: lnsale tang itang itangdum tax prof mtb capexsa liq ndts
yr90 yr91 yr92 yr93 yr94 yr95 yr96 yr97 yr98 yr99 yr00
yr01 yr02 yr03 yr04 yr05 yr06 yr07
Excluded instruments: L.itang L.prof L.mtb L.ndts
Dropped collinear:    yr08


Can anyone tell me why I experience such a large change in the C stat for tang?

Best regards

James
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