INSTRUMENTAL VARIABLES ESTIMATION AND THE COEFFICIENT OF DETERMINATION

1980
Erlat, Halûk
We first demonstrate that Instrumental Variables (IV) may be viewed as a two-step OLS estimator. Subsequently, we show that the coefficient of determination based on IV residuals does not lie between 0 and 1. As an alternative we suggest the use of the coefficient of determination from the second step of the two-step OLS interpretation of IV. The properties of said R2 are investigated and its relationship to the R2 suggested by Carter and Nagar for simultaneous equations is examined.
Citation Formats
H. Erlat, “INSTRUMENTAL VARIABLES ESTIMATION AND THE COEFFICIENT OF DETERMINATION,” ODTÜ Gelişme Dergisi, vol. 7, no. 34, pp. 361–376, 1980, Accessed: 00, 2024. [Online]. Available: https://hdl.handle.net/11511/111344.