Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/cup/etheor/v26y2010i02p369-382_10.html
   My bibliography  Save this article

The Impact Of A Hausman Pretest On The Asymptotic Size Of A Hypothesis Test

Author

Listed:
  • Guggenberger, Patrik
Abstract
This paper investigates the asymptotic size properties of a two-stage test in the linear instrumental variables model when in the first stage a Hausman (1978) specification test is used as a pretest of exogeneity of a regressor. In the second stage, a simple hypothesis about a component of the structural parameter vector is tested, using a t-statistic that is based on either the ordinary least squares (OLS) or the two-stage least squares estimator (2SLS), depending on the outcome of the Hausman pretest. The asymptotic size of the two-stage test is derived in a model where weak instruments are ruled out by imposing a positive lower bound on the strength of the instruments. The asymptotic size equals 1 for empirically relevant choices of the parameter space. The size distortion is caused by a discontinuity of the asymptotic distribution of the test statistic in the correlation parameter between the structural and reduced form error terms. The Hausman pretest does not have sufficient power against correlations that are local to zero while the OLS-based t-statistic takes on large values for such nonzero correlations. Instead of using the two-stage procedure, the recommendation then is to use a t-statistic based on the 2SLS estimator or, if weak instruments are a concern, the conditional likelihood ratio test by Moreira (2003).

Suggested Citation

  • Guggenberger, Patrik, 2010. "The Impact Of A Hausman Pretest On The Asymptotic Size Of A Hypothesis Test," Econometric Theory, Cambridge University Press, vol. 26(2), pages 369-382, April.
    • Handle: RePEc:cup:etheor:v:26:y:2010:i:02:p:369-382_10
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0266466609100026/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:etheor:v:26:y:2010:i:02:p:369-382_10. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/ect .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.