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Hahn–Hausman test as a specification test

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  • Lee, Yoonseok
  • Okui, Ryo

Abstract

This paper develops a modified version of the Sargan [Sargan, J.D., 1958. The estimation of economic relationships using instrumental variables. Econometrica 26 (3), 393–415] restrictions, and shows that it is numerically equivalent to the test statistic of Hahn and Hausman [Hahn, J., Hausman, J., 2002. A new specification test for the validity of instrumental variables. Econometrica 70 (1), 163–189] up to a sign. The modified Sargan test is constructed such that its asymptotic distribution under the null hypothesis of correct specification is standard normal when the number of instruments increases with the sample size. The equivalence result is useful in understanding what the Hahn–Hausman test detects and its power properties.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 167 (2012)
Issue (Month): 1 ()
Pages: 133-139

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Handle: RePEc:eee:econom:v:167:y:2012:i:1:p:133-139

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Web page: http://www.elsevier.com/locate/jeconom

Related research

Keywords: Hahn–Hausman test; Sargan test; Many instruments; Overidentifying restrictions test; Specification test;

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References

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  1. Kelejian, Harry H. & Prucha, Ingmar R., 2010. "Specification and estimation of spatial autoregressive models with autoregressive and heteroskedastic disturbances," Journal of Econometrics, Elsevier, vol. 157(1), pages 53-67, July.
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  3. Morimune, Kimio, 1983. "Approximate Distributions of k-Class Estimators When the Degree of Overidentifiability Is Large Compared with the Sample Size," Econometrica, Econometric Society, vol. 51(3), pages 821-41, May.
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  7. Chirok Han & Peter C.B. Phillips, 2005. "GMM with Many Moment Conditions," Cowles Foundation Discussion Papers 1515, Cowles Foundation for Research in Economics, Yale University.
  8. Hansen, Christian & Hausman, Jerry & Newey, Whitney, 2008. "Estimation With Many Instrumental Variables," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 398-422.
  9. H. Kelejian, Harry & Prucha, Ingmar R., 2001. "On the asymptotic distribution of the Moran I test statistic with applications," Journal of Econometrics, Elsevier, vol. 104(2), pages 219-257, September.
  10. Hausman, Jerry & Stock, James H. & Yogo, Motohiro, 2005. "Asymptotic properties of the Hahn-Hausman test for weak-instruments," Economics Letters, Elsevier, vol. 89(3), pages 333-342, December.
  11. Hasselt, Martijn van, 2010. "Many Instruments Asymptotic Approximations Under Nonnormal Error Distributions," Econometric Theory, Cambridge University Press, vol. 26(02), pages 633-645, April.
  12. James H. Stock & Jonathan Wright, 2000. "GMM with Weak Identification," Econometrica, Econometric Society, vol. 68(5), pages 1055-1096, September.
  13. Yoonseok Lee & Ryo Okui, 2009. "A Specification Test for Instrumental Variables Regression with Many Instruments," Cowles Foundation Discussion Papers 1741, Cowles Foundation for Research in Economics, Yale University.
  14. Andrews, Donald W.K. & Stock, James H., 2007. "Testing with many weak instruments," Journal of Econometrics, Elsevier, vol. 138(1), pages 24-46, May.
  15. Stanislav Anatolyev & Nikolay Gospodinov, 2008. "Specification Testing in Models with Many Instruments," Working Papers w0124, Center for Economic and Financial Research (CEFIR).
  16. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  17. Anderson, T.W. & Kunitomo, Naoto & Matsushita, Yukitoshi, 2010. "On the asymptotic optimality of the LIML estimator with possibly many instruments," Journal of Econometrics, Elsevier, vol. 157(2), pages 191-204, August.
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Cited by:
  1. Tae-Hwan Kim & Christophe Muller, 2013. "A Test for Endogeneity in Conditional Quantiles," AMSE Working Papers 1342, Aix-Marseille School of Economics, Marseille, France, revised Aug 2013.

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