Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130052
Authors: 
Harding, Matthew
Hausman, Jerry
Palmer, Christopher
Year of Publication: 
2015
Series/Report no.: 
cemmap working paper, Centre for Microdata Methods and Practice CWP41/15
Abstract: 
This paper considers the finite sample distribution of the 2SLS estimator and derives bounds on its exact bias in the presence of weak and/or many instruments. We then contrast the behavior of the exact bias expressions and the asymptotic expansions currently popular in the literature, including a consideration of the no-moment problem exhibited by many Nagar-type estimators. After deriving a finite sample unbiased k-class estimator, we introduce a double k-class estimator based on Nagar (1962) that dominates k-class estimators (including 2SLS), especially in the cases of weak and/or many instruments. We demonstrate these properties in Monte Carlo simulations showing that our preferred estimators outperforms Fuller (1977) estimators in terms of mean bias and MSE.
Subjects: 
instrumental variables
weak and many instruments
finite sample
k-class estimators
JEL: 
C31
C13
C15
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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