What is Xtivreg?

What is Xtivreg?

Description. xtivreg offers five different estimators for fitting panel-data models in which some of the right- hand-side covariates are endogenous. These estimators are two-stage least-squares generalizations of. simple panel-data estimators for exogenous variables.

What is xtivreg2 Stata?

xtivreg2 implements IV/GMM estimation of the fixed-effects and first-differences panel data models with possibly endogenous regressors. It is essentially a wrapper for ivreg2, which must be installed for xtivreg2 to run (version 2.1. 11 or above of ivreg2 is required for Stata 9; Stata 8.2 requires ivreg28).

What is Endogeneity in panel data?

The endogeneity problem in the context of corporate finance normally derives from the existence of omitted variables, measurement errors of the variables included in the model, and/or simultaneity between the dependent and independent variables.

How do you identify endogeneity?

The pitfall of such problems is that the only currently known way to check for endogeneity is to find proper instruments, use them in some instrumental variable regression (IV henceforth) and then test if the IV and the OLS estimator lead to statistically different results.

What is the problem of endogeneity?

The basic problem of endogeneity occurs when the explanans (X) may be influenced by the explanandum (Y) or both may be jointly influenced by an unmeasured third. The endogeneity problem is one aspect of the broader question of selection bias discussed earlier.

What are the three sources of endogeneity?

2. Sources of endogeneity. Literature emphasizes three primary instances where the condition of exogeneity becomes violated and therefore endogeneity occurs: omission of variables, errors-in-variables, and simultaneous causality (Wooldridge, 2002).

How do you test for weak instruments?

Use the F-statistic to test for the significance of excluded instruments. If the first-stage F-statistic is smaller than 10, this indicates the presence of a weak instrument. For a scalar regressor (x) and scalar instrument (z), a small r squared (when x is regressed on z) indicates a weak instrument.

How do you fix endogeneity problems?

The best way to deal with endogeneity concerns is through instrumental variables (IV) techniques. The most common IV estimator is Two Stage Least Squares (TSLS). IV estimation is intuitively appealing, and relatively simple to implement on a technical level.

What are OLS assumptions?

OLS Assumption 3: The conditional mean should be zero. The expected value of the mean of the error terms of OLS regression should be zero given the values of independent variables. The OLS assumption of no multi-collinearity says that there should be no linear relationship between the independent variables.

What is weak instrument bias?

This bias, known as ‘weak instrument bias’, is in the direction of the confounded observational association between phenotype and outcome, and depends on the strength of the instrument [13]. Weak instruments are also associated with underestimated confidence intervals and poor coverage properties [14].

What is weak instrument problem?

Weak instruments—instruments that are only marginally valid—can cause many problems, including: Biased estimates for independent variables, Hypothesis tests with large size distortions (Stock & Yogo, 2002)

How do I know if I have endogeneity problems?

How to do xtivreg2 test for instrument relevance?

Please see the FAQ on asking questions. xtivreg2 has some of these tests built in. Otherwise, look at various estat options. You will increase your chances of a useful reply if you provide Stata code (using code delimiters), Stata output, and sample data (using dateex).

When was the last time I edited xtivreg?

Last edited by Krissy Philips; 23 Feb 2017, 04:26 . You will increase your chances of a useful reply if you provide Stata code (using code delimiters), Stata output, and sample data (using dateex). Please see the FAQ on asking questions.

Is the panel data in xtivreg unbalanced or robust?

The panel data is unbalanced, but because I use Fixed-Effect model at least I mitigate some attrition problem. Using an IV (village mean of land ownership with documents) and testing for the endogeneity of the main regressor, I found out that land certificate is indeed endogenous and the IV is not a weak instrument.

When to use xtoverid to test excluded instruments?

Essentially, xtoverid can be used in three cases: to test on excluded instruments in IV estimations, to test on model specification (FE or RE), and to test on the strong assumption in an xthtaylor estimation.