A Note on R2 in the Instrumental Variables Model

Windmeijer, Frank (1995): A Note on R2 in the Instrumental Variables Model. Published in: Journal of Quantitative Economics , Vol. 11, (January 1995): pp. 257-261.

Abstract

The properties of two goodness-of-fit measures are analyzed for the instrumental variables model. One measure is based on the two-step approach to IV estimation and is equal to the coefficient of determination in the second stage equation. This measure therefore measures the fit of a transformation of the original model. The other measure is the one proposed by Barten (1987) for the linear model without a constant term. In comparison with the other R2-measure, Barten's measure has as an advantage that it measures the fit of the original model. As a disadvantage, the measure does not have a relation with the chi-squared statistic, testing whether all slope coefficients are equal to zero.

• Item Type: MPRA Paper
• Language: English
• Keywords: Instrumental Variables; Goodness of Fit
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C26 - Instrumental Variables (IV) Estimation; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C36 - Instrumental Variables (IV) Estimation

References

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Windmeijer, F. (1992), Goodness of Fit in Linear and Qualitative-Choice Models, PhD Thesis, University of Amsterdam, Thesis Publishers, Amsterdam