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Activity Number: 144
Type: Contributed
Date/Time: Monday, August 4, 2008 : 10:30 AM to 12:20 PM
Sponsor: Business and Economics Statistics Section
Abstract - #302315
Title: Small Sample Performance of Instrumental Variables Probit Estimators: A Monte Carlo Investigation
Author(s): Lee C. Adkins*+
Companies: Oklahoma State University
Address: 303 Department of Economics, Stillwater, OK, 74074,
Keywords: binary choice ; Instrumental variables ; probit
Abstract:

The statistical properties of several commonly used estimators of an endogenous probit model are studied using Monte Carlo simulation. Bias, standard error, and the properties of significance test are examined. Various dimensions that affect the performance of estimators of this model are examined, including sample size, proportion of observations where y=1, correlation between instruments and the endogenous variable, the correlation between the endogenous variable and the equation's error, and the relative variability of the endogenous regressor(s) and the equation's error. The estimators are used in an example that examines the effect of managerial incentives on the use of foreign-exchange derivatives by bank-holding companies.

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