# What does the Hansen test do?

## What does the Hansen test do?

test is a statistical test used for testing over-identifying restrictions in a statistical model.

**How do you read the sargan test results?**

Sargan p-value must not be less < 5% and > 10%. The higher the p-value of the sargan statistic the better. However according to Roodman (2006) , it is recommended that sargan p-value should be greater than 0.25. This does not invalidate other results that rejects the null hypothesis.

### What is J test statistics?

The test statistic is the sum of weighted square deviations of the sample moments evaluated at the GMM estimates, and under the null hypothesis of the restrictions its asymptotic distribution is chi-squared with the number of degrees of freedom equal to the number of restrictions tested.

**What is over identifying restrictions?**

The overidentifying restrictions test (also called the J -test) is an approach to test the hypothesis that additional instruments are exogenous. For the J -test to be applicable there need to be more instruments than endogenous regressors.

## What is AJ statistic?

Youden’s J statistic (also called Youden’s index) is a single statistic that captures the performance of a dichotomous diagnostic test. Informedness is its generalization to the multiclass case and estimates the probability of an informed decision.

**What is the meaning of weak instruments and why it is a problem how do you find a valid instruments?**

Weak instruments—instruments that are only marginally valid—can cause many problems, including: Biased estimates for independent variables, Hypothesis tests with large size distortions (Stock & Yogo, 2002)

### What is exclusion restriction?

The concept of exclusion restrictions denotes that some of the exogenous variables are not in some of the equations. Often this idea is expressed by saying the coefficient next to that exogenous variable is zero.

**How do you test for weak instruments?**

Use the F-statistic to test for the significance of excluded instruments. If the first-stage F-statistic is smaller than 10, this indicates the presence of a weak instrument. For a scalar regressor (x) and scalar instrument (z), a small r squared (when x is regressed on z) indicates a weak instrument.