On the Size Distortion of Tests after an Overidentifying Restrictions Pretest

@inproceedings{Guggenberger2010OnTS,
  title={On the Size Distortion of Tests after an Overidentifying Restrictions Pretest},
  author={Patrik Guggenberger and Gyanendra Kumar},
  year={2010}
}
In the linear instrumental variables model, we provide theoretical and Monte Carlo evidence for the size distortion of a two-stage hypothesis test that uses a test of overidentifying restrictions in the …rst stage. We derive a lower bound for the asymptotic size of the two-stage test. The lower bound is given by the asymptotic size of a test that rejects the null hypothesis when two conditions are met: the test of overidentifying restrictions used in the …rst stage does not reject and the test… CONTINUE READING

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