Testing Overidentifying Restrictions with Many Instruments and Heteroskedasticity
John C. Chao
,
1
(
178
)
Journal of Econometrics
15-21
January
2014
Abstract
This paper gives a test of overidentifying restrictions that is robust to many instruments and heteroskedasticity. It is based on a jackknife version of the overidentifying test statistic. Correct asymptotic critical values are derived for this statistic when the number of instruments grows large, at a rate up to the sample size. It is also shown that the test is valid when the number of instruments is fixed and there is homoskedasticity. This test improves on recently proposed tests by allowing for heteroskedasticity and by avoiding assumptions on the instrument projection matrix.