Testing endogeneity with high dimensional covariates
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Publication:84409
DOI10.48550/ARXIV.1609.06713zbMATH Open1452.62913arXiv1609.06713OpenAlexW2963042484MaRDI QIDQ84409FDOQ84409
Dylan S. Small, Zi-Jian Guo, Zijian Guo, Dylan S. Small, Hyunseung Kang, Hyunseung Kang, T. Tony Cai, T. Tony Cai
Publication date: 21 September 2016
Published in: Journal of Econometrics (Search for Journal in Brave)
Abstract: Modern, high dimensional data has renewed investigation on instrumental variables (IV) analysis, primarily focusing on estimation of effects of endogenous variables and putting little attention towards specification tests. This paper studies in high dimensions the Durbin-Wu-Hausman (DWH) test, a popular specification test for endogeneity in IV regression. We show, surprisingly, that the DWH test maintains its size in high dimensions, but at an expense of power. We propose a new test that remedies this issue and has better power than the DWH test. Simulation studies reveal that our test achieves near-oracle performance to detect endogeneity.
Full work available at URL: https://arxiv.org/abs/1609.06713
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instrumental variableDurbin-Wu-Hausman testendogeneity testhigh dimensionsinvalid instrumentspower function
Linear regression; mixed models (62J05) Applications of statistics to economics (62P20) Hypothesis testing in multivariate analysis (62H15)
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Cited In (7)
- Structural Equation Model Averaging: Methodology and Application
- Endogeneity in high dimensions
- Hypothesis Testing in High-Dimensional Instrumental Variables Regression With an Application to Genomics Data
- Nonparametric instrument model averaging
- RobustIV
- Conditional sparse boosting for high-dimensional instrumental variable estimation
- Regularization methods for high-dimensional sparse control function models
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