Dear all,
I am posting a discussion we have had with Mark in order to get some others' ideas on this. I would like to know from your experience if there is a test of overidentification after etregress (e.g. LR test) and what exactly the null hypothesis would be if so.
____________________________________________
From: Ferreira Sequeda Maria
Sent: 04 December 2014 15:51
To: Schaffer, Mark
Subject: Question about overid test after etregress
Dear Mark,
I am working with etregress (previous treatreg) and would like to know if there is a way to test the validity of my instrument. I read this from some time ago http://www.stata.com/statalist/archi.../msg00924.html and this http://www.stata.com/statalist/archi.../msg00924.html but I am still a bit confuse.
My model say is
Y = a + b*T + c*X1 + d*X2
T = f + g*X1 + i*X3
X3 is my instrument.
If I understand correctly, to run a LR overid test I should do
(1) etregress Y X1 X2, treat(T X1 X3)
est sto overid
(2) etregress Y X1 X2 X3, treat(T X1 X2 X3)
est sto justid
lrtest justid overid, df(2)
(2) means
Y = a + b*T + c*X1 + d*X2 +e*X3
T = f + g*X1 + h*X2 + i*X3
What exactly is the null? I do not understand well what I am testing. According to your entries in statalist, Ho test that e=0 … and probably also in mi case h=0?
If that is true, then I say that my instrument is valid if the p-value obtained>0.05. Is that correct?
How can I understand that LR assumes that overid is NESTED in justid?
If I would do the following, is it incorrect?
(3) etregress Y X1 X2, treat(T X1 X3)
est sto overid1
(2) etregress Y X1 X2, treat(T X1) ----> which I assumed is the model just identified through the normality assumption (when no instrument is used)
est sto justid1
lrtest justid1 overid1, df(1)
LR test would assume justid1 is NESTED in overid1
Would not it be in this case that Ho test i=0, then my instrument is valid if the p-value obtained<0.05.
I appreciate if you can help me to clear this issue.
Best,
Maria
___________________________
From: Schaffer, Mark
Sent: donderdag 4 december 2014 18:30
To: Ferreira Sequeda Maria (ALGEC)
Subject: RE: Question about overid test after etregress
Maria,
Short answer: I think it should be
(1) etregress Y X1 X2, treat(T X1 X2)
est sto justid
(2) etregress Y X1 X2, treat(T X1 X2 X3)
est sto overid
In #1, everything goes in both the main and treatment equation. In #2, the excluded instrument X3 gets added to the treatment equation.
But if you want to follow up, can you post this to Statalist and we can discuss there? That way others can benefit from the discussion, and/or you will get better or faster comments than from me.
Best wishes,
MS
I am posting a discussion we have had with Mark in order to get some others' ideas on this. I would like to know from your experience if there is a test of overidentification after etregress (e.g. LR test) and what exactly the null hypothesis would be if so.
____________________________________________
From: Ferreira Sequeda Maria
Sent: 04 December 2014 15:51
To: Schaffer, Mark
Subject: Question about overid test after etregress
Dear Mark,
I am working with etregress (previous treatreg) and would like to know if there is a way to test the validity of my instrument. I read this from some time ago http://www.stata.com/statalist/archi.../msg00924.html and this http://www.stata.com/statalist/archi.../msg00924.html but I am still a bit confuse.
My model say is
Y = a + b*T + c*X1 + d*X2
T = f + g*X1 + i*X3
X3 is my instrument.
If I understand correctly, to run a LR overid test I should do
(1) etregress Y X1 X2, treat(T X1 X3)
est sto overid
(2) etregress Y X1 X2 X3, treat(T X1 X2 X3)
est sto justid
lrtest justid overid, df(2)
(2) means
Y = a + b*T + c*X1 + d*X2 +e*X3
T = f + g*X1 + h*X2 + i*X3
What exactly is the null? I do not understand well what I am testing. According to your entries in statalist, Ho test that e=0 … and probably also in mi case h=0?
If that is true, then I say that my instrument is valid if the p-value obtained>0.05. Is that correct?
How can I understand that LR assumes that overid is NESTED in justid?
If I would do the following, is it incorrect?
(3) etregress Y X1 X2, treat(T X1 X3)
est sto overid1
(2) etregress Y X1 X2, treat(T X1) ----> which I assumed is the model just identified through the normality assumption (when no instrument is used)
est sto justid1
lrtest justid1 overid1, df(1)
LR test would assume justid1 is NESTED in overid1
Would not it be in this case that Ho test i=0, then my instrument is valid if the p-value obtained<0.05.
I appreciate if you can help me to clear this issue.
Best,
Maria
___________________________
From: Schaffer, Mark
Sent: donderdag 4 december 2014 18:30
To: Ferreira Sequeda Maria (ALGEC)
Subject: RE: Question about overid test after etregress
Maria,
Short answer: I think it should be
(1) etregress Y X1 X2, treat(T X1 X2)
est sto justid
(2) etregress Y X1 X2, treat(T X1 X2 X3)
est sto overid
In #1, everything goes in both the main and treatment equation. In #2, the excluded instrument X3 gets added to the treatment equation.
But if you want to follow up, can you post this to Statalist and we can discuss there? That way others can benefit from the discussion, and/or you will get better or faster comments than from me.
Best wishes,
MS
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