A Cautionary Note on Tests for Overidentifying Restrictions
AbstractTests of overidentifying restrictions are widely used in practice. However, there is often confusion about the nature of their null hypothesis and about the interpretation of their outcome. In this note we argue that these tests give little information on whether the instruments are correlated with the errors of the underlaying economic model and on whether they identify parameters of interest.
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Bibliographic InfoPaper provided by Exeter University, Department of Economics in its series Discussion Papers with number 1111.
Date of creation: 2011
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GMM; Hansen's J-test; Instrumental variables; Sargan test.;
Other versions of this item:
- Parente, Paulo M.D.C. & Santos Silva, J.M.C., 2012. "A cautionary note on tests of overidentifying restrictions," Economics Letters, Elsevier, vol. 115(2), pages 314-317.
- Paulo M.D.C. Parente & J.M.C. Santos Silva, 2011. "A cautionary note on tests for overidentifying restrictions," Economics Discussion Papers 699, University of Essex, Department of Economics.
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
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