Re: st: AW: xtabond2 - Sargan test and reducing instruments

[Christian Schroetel <christian.schroetel@googlemail.com>]

Hey,

ok, so here you go for a bit more detailed information: My starting
sample is from about 3k firms (from around 20 countries, some far
better represented than others) and years from 1993 to 2012, adding up
to around 47k observations. It's unbalanced though and some variables
only contain like 12k observations. So, when I combine them in one
regression, I get those 3k observations I talked about earlier. Those
are then from 445 firms with 1 to 19 years per firm (avg 6.9 years per
firm).

Hope that helps a bit.

2013/9/13 Dithmer, Jan <jdithme@food-econ.uni-kiel.de>:
> Hi Christian,
>
> I suspect that nobody will be able to make any specific comments on your question, as the number of instruments depends on the number of time periods you have,
> and you don't say anything about your sample...
>
> Best, Jan
>
> -----Ursprüngliche Nachricht-----
> Von: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] Im Auftrag von Christian Schroetel
> Gesendet: Friday, September 13, 2013 9:15 AM
> An: statalist@hsphsun2.harvard.edu
> Betreff: st: xtabond2 - Sargan test and reducing instruments
>
> Dear Statalist users,
>
> I'm trying to use the system GMM estimation on my panel data with firm growth as the dependent variable and 13 explanatory variables. One of the explanatory variables is the lagged dependent variable, so I tried the Arellano-Bond, respectively the augmented versions.
> I've read the help for xtabond, xtdpdsys and xtabond2 and the paper of Roodman but I still don't completely get how that thing is working, in particular how the number of instruments are created. I actually really only want the t-1 lagged dependent variable plus the 12 other explanatory variables, so I tried the following with xtdpdsys (I made it to transform that into xtabond2 as well getting the same number of instruments, but the command would be too long):
> - xtdpdsys sgrowth l.slnsales slnage sinternationalsales sleverage srdintensity spersonalpremium sintangibles stobinsq sclr sroa scurrentratio scashflowsales, maxldep(1) artests(2) -
>
> That creates me 49 instruments at about 3k observations and I get the following sargan test:
> Sargan test of overidentifying restrictions
>         H0: overidentifying restrictions are valid
>
>         chi2(35)     =  990.1915
>         Prob > chi2  =    0.0000
>
> First of all: Why so many instruments? I know those are mostly coming from the dep. variable, because for each indep. variable I remove I get one istrument less, so it's like 35 instruments only from the dep.
> variable, why is that?
>
> Second: What could be reasons the Sargan test statistics is so "bad".
> I've seen other with only a bit less instruments but far less observations getting far better Sargan tests. What could I do to solve the problem of overidentifying restrictions? May it just be my explanatory variables are bad?
>
> Any help would be appreciated, I'm quite near desperation on that.
>
> Thanks in advance.
>
> Christian
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