How to interpret J statistic and Prob J-Statistic in difference GMM method

[Vaishnavi Balaji]

Dear Sir/Mam,

I don't know how to interpret the results of J statistic and Prob(J-Statistic) in difference GMM? I have referred many articles but unable to understand? Kindly guide me.

J statistic value for my analysis is 19.99

Prob(J Statistic) is 0.45.

Kindly guide me how to interpret. Thank you very much.

[Miklesh Yadav]

Dear Vaishnavi

J Statistic is nothing but “robustified Sargan statistic”  which is computed from two–step GMM. It means this is a test for checking the validity of instruments in GMM in the presence of conditional heteroscedasticity. 

In a nutshell, if conditional heteroscedasticity is absent Sargan statistic is employed but if conditional heteroscedasticity is present, J statistic is inferred. The p-value of J-stat is greater than 0.05 indicates the presence of validity in instruments.

Regards

 

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[Vaishnavi Balaji]

Dear Miklesh Sir, 

                             Thank you so much for your explanation Sir.

Thank you Sir

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