Specification Testing in Models with Many Instruments

Stanislav Anatolyev and Nikolay Gospodinov

No w0124, Working Papers from New Economic School (NES)

Abstract: This paper studies the asymptotic validity of the Anderson-Rubin (AR) test and the J test of overidentifying restrictions in linear models with many instruments. When the number of instruments increases at the same rate as the sample size, we establish that the conventional AR and J tests are asymptotically incorrect. Some versions of these tests, that are developed for situations with moderately many instruments, are also shown to be asymptotically invalid in this framework. We propose modifications of the AR and J tests that deliver asymptotically correct sizes. Importantly, the corrected tests are robust to the numerosity of the moment conditions in the sense that they are valid for both few and many instruments. The simulation results illustrate the excellent properties of the proposed tests.

Keywords: Instrumental variables; many instruments; Bekker?s asymptotics; Anderson? Rubin test; test for overidentifying restrictions. (search for similar items in EconPapers)
JEL-codes: C12 C21 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2008-09
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.nes.ru/files/Preprints-resh/WP124.pdf (application/pdf)

Related works:
Journal Article: SPECIFICATION TESTING IN MODELS WITH MANY INSTRUMENTS (2011)
Working Paper: Specification Testing in Models with Many Instruments (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:abo:neswpt:w0124

Access Statistics for this paper

More papers in Working Papers from New Economic School (NES) Contact information at EDIRC.
Bibliographic data for series maintained by Vladimir Ivanyukhin ( this e-mail address is bad, please contact ).