A New Matrix Statistic for the Hausman Endogeneity Test under Heteroskedasticity
We derive a new matrix statistic for the Hausman test for endogeneity in cross-sectional Instrumental Variables estimation, that incorporates heteroskedasticity in a natural way and does not use a generalized inverse. A Monte Carlo study examines the performance of the statistic for different hetero...
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| Format: | Article |
| Language: | English |
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MDPI AG
2023-10-01
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| Series: | Econometrics |
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| Online Access: | https://www.mdpi.com/2225-1146/11/4/23 |
| _version_ | 1797381359064317952 |
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| author | Alecos Papadopoulos |
| author_facet | Alecos Papadopoulos |
| author_sort | Alecos Papadopoulos |
| collection | DOAJ |
| description | We derive a new matrix statistic for the Hausman test for endogeneity in cross-sectional Instrumental Variables estimation, that incorporates heteroskedasticity in a natural way and does not use a generalized inverse. A Monte Carlo study examines the performance of the statistic for different heteroskedasticity-robust variance estimators and different skedastic situations. We find that the test statistic performs well as regards empirical size in almost all cases; however, as regards empirical power, how one corrects for heteroskedasticity matters. We also compare its performance with that of the Wald statistic from the augmented regression setup that is often used for the endogeneity test, and we find that the choice between them may depend on the desired significance level of the test. |
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| format | Article |
| id | doaj.art-f91dec4a860340939e27ae166de5f8d3 |
| institution | Directory Open Access Journal |
| issn | 2225-1146 |
| language | English |
| last_indexed | 2024-03-08T20:51:16Z |
| publishDate | 2023-10-01 |
| publisher | MDPI AG |
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| series | Econometrics |
| spelling | doaj.art-f91dec4a860340939e27ae166de5f8d32023-12-22T14:04:11ZengMDPI AGEconometrics2225-11462023-10-011142310.3390/econometrics11040023A New Matrix Statistic for the Hausman Endogeneity Test under HeteroskedasticityAlecos Papadopoulos0Department of Economics, Athens University of Economics and Business, TK 10434 Athens, GreeceWe derive a new matrix statistic for the Hausman test for endogeneity in cross-sectional Instrumental Variables estimation, that incorporates heteroskedasticity in a natural way and does not use a generalized inverse. A Monte Carlo study examines the performance of the statistic for different heteroskedasticity-robust variance estimators and different skedastic situations. We find that the test statistic performs well as regards empirical size in almost all cases; however, as regards empirical power, how one corrects for heteroskedasticity matters. We also compare its performance with that of the Wald statistic from the augmented regression setup that is often used for the endogeneity test, and we find that the choice between them may depend on the desired significance level of the test.https://www.mdpi.com/2225-1146/11/4/23Hausman testheteroskedasticityendogeneityinstrumental variablesgeneralized matrix inverseWald statistic |
| spellingShingle | Alecos Papadopoulos A New Matrix Statistic for the Hausman Endogeneity Test under Heteroskedasticity Econometrics Hausman test heteroskedasticity endogeneity instrumental variables generalized matrix inverse Wald statistic |
| title | A New Matrix Statistic for the Hausman Endogeneity Test under Heteroskedasticity |
| title_full | A New Matrix Statistic for the Hausman Endogeneity Test under Heteroskedasticity |
| title_fullStr | A New Matrix Statistic for the Hausman Endogeneity Test under Heteroskedasticity |
| title_full_unstemmed | A New Matrix Statistic for the Hausman Endogeneity Test under Heteroskedasticity |
| title_short | A New Matrix Statistic for the Hausman Endogeneity Test under Heteroskedasticity |
| title_sort | new matrix statistic for the hausman endogeneity test under heteroskedasticity |
| topic | Hausman test heteroskedasticity endogeneity instrumental variables generalized matrix inverse Wald statistic |
| url | https://www.mdpi.com/2225-1146/11/4/23 |
| work_keys_str_mv | AT alecospapadopoulos anewmatrixstatisticforthehausmanendogeneitytestunderheteroskedasticity AT alecospapadopoulos newmatrixstatisticforthehausmanendogeneitytestunderheteroskedasticity |