Thursday, March 16, 2006

Re: st: ivreset

-findit ivreset- then -help ivreset- when installed has a excellent exposition that begins:

As Pagan and Hall (1983) and Pesaran and Taylor (1999) point out, a RESET test for an IV regression cannot use the standard IV predicted values X*beta-hat, because X includes endogenous regressors that are correlated with u.

Try this code instead:

use qui ivreg2 lw s expr tenure rns smsa (iq=med kww) predict ytilde mat b=e(b) mat li b qui regress iq s expr tenure rns smsa med kww qui predict double xh gen yhat=ytil-b[1,1]*iq+b[1,1]*xh sum yhat, meanonly qui replace yhat = (yhat-r(min))/(r(max)-r(min)) qui gen double yhat2=yhat^2 qui ivreg2 lw s expr tenure rns smsa yhat2 (iq=med kww) test yhat2 qui ivreg2 lw s expr tenure rns smsa (iq=med kww) ivreset

Now, as to why replace yhat = (yhat-r(min))/(r(max)-r(min)) I cannot tell you, but it's in ivreset.ado

On 16 Mar 2006 19:10:13 +0000, Arne Risa Hole wrote: > I am using ivreset to do a Pesaran-Taylor Reset test after ivreg2. However, > I am not able to replicate the result from ivreset manually. For example: > > use

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