Which object from the first or second stage reports whether an instrument is exogenous?
A) Check if the residuals from the first stage regression are uncorrelated with the instrumental variable.
B) Check if the residuals from the second stage regression are uncorrelated with the instrumental variable.
C) Check if the instrumental variable is uncorrelated with the outcome variable.
D) None of the answers is correct.

Question

Quizplus · Accepted Answer

None of the options correctly describe the process of testing for the exogeneity of an instrument. Typically, the exogeneity of an instrument is tested using over-identification tests like the Sargan or Hansen test, which are not described in the given options.

Which Object from the First or Second Stage Reports Whether