QUESTION 3 a) Explain the concept of “endogeneity” in a regression model and how instrumental variables (IV) can help to

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QUESTION 3 a) Explain the concept of “endogeneity” in a regression model and how instrumental variables (IV) can help to

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QUESTION 3
a) Explain the concept of “endogeneity” in a regression model and
how instrumental variables (IV) can help to address it.
[15 MARKS]
b) Discuss the conditions under which an instrumental variable is
both valid and relevant. Also, describe how the IV validity can be
tested.
[20 MARKS]
c) Based on the table below, discuss the tests carried out and
explain how the results can be interpreted.
Question 3 A Explain The Concept Of Endogeneity In A Regression Model And How Instrumental Variables Iv Can Help To 1
Question 3 A Explain The Concept Of Endogeneity In A Regression Model And How Instrumental Variables Iv Can Help To 1 (68.27 KiB) Viewed 24 times
Table 9 Weak instrument tests for instrumental variables Panel A: Fraction_enroll Dependent variable: Avg ROA Chi-square/F-statistics Hausman Test 17.356*** Stock and Yogo 23.049*** Anderson-Canon 22.920*** Anderson-Rubin 21.760*** Stock-Wright Chi-square 23.220*** Sanderson-Windmeijer (SW) F-statistics 23.050*** Hansen-Sargan (P-value) 0.000*** P-value 0.100 0.000 0.000 0.120 0.000 0.000
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