Sargan test
Encyclopedia
The Sargan test is a statistical test used to check for over-identifying restrictions in a statistical model
. The Sargan test is based on the observation that the residuals should be uncorrelated with the set of exogenous variables if the instruments are truly exogenous. The Sargan test statistic can be calculated as TR2 (the number of observations multiplied by the coefficient of determination) from the OLS regression of the residuals (from IV estimation) onto the set of exogenous variables. This statistic will be asymptotically chi-squared with m − k degrees of freedom under the null that the error term is uncorrelated with the instruments.
Statistical model
A statistical model is a formalization of relationships between variables in the form of mathematical equations. A statistical model describes how one or more random variables are related to one or more random variables. The model is statistical as the variables are not deterministically but...
. The Sargan test is based on the observation that the residuals should be uncorrelated with the set of exogenous variables if the instruments are truly exogenous. The Sargan test statistic can be calculated as TR2 (the number of observations multiplied by the coefficient of determination) from the OLS regression of the residuals (from IV estimation) onto the set of exogenous variables. This statistic will be asymptotically chi-squared with m − k degrees of freedom under the null that the error term is uncorrelated with the instruments.
External links
- Lecture 4, see under heading "Sargan Test" on page 14