Dear All,
I estimate a SYS-GMM using xtabond2. In order to reduce the proliferation of instruments, I use the option pca to replace instruments with their principal componets. Below an example, taken fron xtabond2 helpfile:
My question is why when the option pca is used, the Hansen-in-difference test is not reported. Is this something which has not been implemented or it is a consequence of the construction of instruments?
Thanks for your help.
Dario
I estimate a SYS-GMM using xtabond2. In order to reduce the proliferation of instruments, I use the option pca to replace instruments with their principal componets. Below an example, taken fron xtabond2 helpfile:
Code:
use http://www.stata-press.com/data/r7/abdata.dta, clear
xtabond2 n L.n L(0/1).(w k) yr1978-yr1984, gmm(L.(w k n)) iv(yr1978-yr1984, eq(level)) h(2) robust twostep
xtabond2 n L.n L(0/1).(w k) yr1978-yr1984, gmm(L.(w k n)) iv(yr1978-yr1984, eq(l
> evel)) h(2) robust twostep
Favoring speed over space. To switch, type or click on mata: mata set matafavor sp
> ace, perm.
Warning: Two-step estimated covariance matrix of moments is singular.
Using a generalized inverse to calculate optimal weighting matrix for two-step e
> stimation.
Difference-in-Sargan/Hansen statistics may be negative.
DFm
12
Dynamic panel-data estimation, two-step system GMM
------------------------------------------------------------------------------
Group variable: id Number of obs = 891
Time variable : year Number of groups = 140
Number of instruments = 113 Obs per group: min = 6
Wald chi2(12) = 30589.15 avg = 6.36
Prob > chi2 = 0.000 max = 8
------------------------------------------------------------------------------
| Corrected
n | Coefficient std. err. z P>|z| [95% conf. interval]
-------------+----------------------------------------------------------------
n |
L1. | .872881 .0452841 19.28 0.000 .7841259 .9616362
|
w |
--. | -.7797449 .1165601 -6.69 0.000 -1.008199 -.5512913
L1. | .5268032 .1620827 3.25 0.001 .2091269 .8444795
|
k |
--. | .4700773 .0798591 5.89 0.000 .3135562 .6265983
L1. | -.3576081 .0800305 -4.47 0.000 -.514465 -.2007512
|
yr1978 | .0058018 .0197099 0.29 0.768 -.0328288 .0444325
yr1979 | .0188977 .0227673 0.83 0.407 -.0257254 .0635207
yr1980 | .0028196 .0240708 0.12 0.907 -.0443583 .0499976
yr1981 | -.0200226 .0274419 -0.73 0.466 -.0738078 .0337625
yr1982 | .0152802 .0233063 0.66 0.512 -.0303992 .0609597
yr1983 | .031731 .0234974 1.35 0.177 -.0143231 .0777852
yr1984 | .0224206 .0310743 0.72 0.471 -.038484 .0833251
_cons | .9484881 .3775501 2.51 0.012 .2085035 1.688473
------------------------------------------------------------------------------
Instruments for first differences equation
GMM-type (missing=0, separate instruments for each period unless collapsed)
L(1/8).(L.w L.k L.n)
Instruments for levels equation
Standard
yr1978 yr1979 yr1980 yr1981 yr1982 yr1983 yr1984
_cons
GMM-type (missing=0, separate instruments for each period unless collapsed)
D.(L.w L.k L.n)
------------------------------------------------------------------------------
Arellano-Bond test for AR(1) in first differences: z = -5.81 Pr > z = 0.000
Arellano-Bond test for AR(2) in first differences: z = -0.15 Pr > z = 0.883
------------------------------------------------------------------------------
Sargan test of overid. restrictions: chi2(100) = 157.41 Prob > chi2 = 0.000
(Not robust, but not weakened by many instruments.)
Hansen test of overid. restrictions: chi2(100) = 111.59 Prob > chi2 = 0.201
(Robust, but weakened by many instruments.)
Difference-in-Hansen tests of exogeneity of instrument subsets:
GMM instruments for levels
Hansen test excluding group: chi2(79) = 88.15 Prob > chi2 = 0.225
Difference (null H = exogenous): chi2(21) = 23.43 Prob > chi2 = 0.321
iv(yr1978 yr1979 yr1980 yr1981 yr1982 yr1983 yr1984, eq(level))
Hansen test excluding group: chi2(93) = 109.91 Prob > chi2 = 0.111
Difference (null H = exogenous): chi2(7) = 1.68 Prob > chi2 = 0.976
xtabond2 n L.n L(0/1).(w k) yr1978-yr1984, gmm(L.(w k n)) iv(yr1978-yr1984, eq(level)) h(2) robust twostep pca
. xtabond2 n L.n L(0/1).(w k) yr1978-yr1984, gmm(L.(w k n)) iv(yr1978-yr1984, eq(l
> evel)) h(2) robust twostep pca
Favoring speed over space. To switch, type or click on mata: mata set matafavor sp
> ace, perm.
DFm
12
Dynamic panel-data estimation, two-step system GMM
------------------------------------------------------------------------------
Group variable: id Number of obs = 891
Time variable : year Number of groups = 140
Number of instruments = 30 Obs per group: min = 105
Wald chi2(12) = 18837.79 avg = 6.36
Prob > chi2 = 0.000 max = 105
------------------------------------------------------------------------------
| Corrected
n | Coefficient std. err. z P>|z| [95% conf. interval]
-------------+----------------------------------------------------------------
n |
L1. | .7442984 .1188411 6.26 0.000 .5113742 .9772226
|
w |
--. | -.5508836 .2734039 -2.01 0.044 -1.086745 -.0150218
L1. | .5902001 .2157227 2.74 0.006 .1673915 1.013009
|
k |
--. | .5825344 .1220112 4.77 0.000 .3433968 .8216719
L1. | -.3727485 .1221863 -3.05 0.002 -.6122293 -.1332678
|
yr1978 | .0183634 .0222118 0.83 0.408 -.0251709 .0618977
yr1979 | .0324347 .027394 1.18 0.236 -.0212565 .086126
yr1980 | .0279043 .0309407 0.90 0.367 -.0327383 .0885469
yr1981 | -.0043591 .039225 -0.11 0.912 -.0812386 .0725204
yr1982 | .0161275 .0469819 0.34 0.731 -.0759553 .1082104
yr1983 | .0264509 .0489436 0.54 0.589 -.0694767 .1223785
yr1984 | .0126307 .050074 0.25 0.801 -.0855125 .1107739
_cons | .2061285 .5410598 0.38 0.703 -.8543292 1.266586
------------------------------------------------------------------------------
Instruments for first differences equation
GMM-type (missing=0, separate instruments for each period unless collapsed)
L(1/8).(L.w L.k L.n)
Instruments for levels equation
Standard
yr1978 yr1979 yr1980 yr1981 yr1982 yr1983 yr1984
_cons
GMM-type (missing=0, separate instruments for each period unless collapsed)
D.(L.w L.k L.n)
------------------------------------------------------------------------------
Arellano-Bond test for AR(1) in first differences: z = -4.31 Pr > z = 0.000
Arellano-Bond test for AR(2) in first differences: z = -0.10 Pr > z = 0.922
------------------------------------------------------------------------------
Sargan test of overid. restrictions: chi2(17) = 19.11 Prob > chi2 = 0.322
(Not robust, but not weakened by many instruments.)
Hansen test of overid. restrictions: chi2(17) = 23.28 Prob > chi2 = 0.140
(Robust, but weakened by many instruments.)
------------------------------------------------------------------------------
Extracted 22 principal components from GMM-style instruments
Portion of variance explained by the components = 0.837
Kaiser-Meyer-Olkin measure of sampling adequacy = 0.738
Thanks for your help.
Dario
