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Hello everyone,

Can anyone share how can i run the hansen and sargan test using eviews 11 for System GMM ?

And can anyone share what the J-Statistic represent ?

After runing the System GMM my J-Statistic = 2.62, what does it mean ?

Thank you in advance

Best regards

Hello,
Your J-stat value of 2.62 is the Sargan test statistics which tells you if the instrumental variables used in the system GMM is exogeneously related to the error term with the help of the probability value.

However you need to compute and display the probability value with the scalar and @chisq(z, y) function. usually express in the eview command window as:
Scalar Pval = @chisq(2.62, n)
show Pval

Note: n = instrument rank number - (minus) number of coefficient estimated
e.g if the instrument rank in your GMM output is 25 and the number of explanatory variables coefficient is 5 then
n = 25 - 5
n = 20
and your 2.62 is always your J-Stat value
Thus, you now have
Scalar Pval = @chisq(2.62, 20)
show Pval
Pls note: minimum probability of 0.25 is required to accept that the instrument are valid and exogenously related to the error term. Hence they meet the Orthogonal conditions. Prob. value below 0.25 means that the instrument are not valid and endoogenously related to the error term. hence fail to meet the orthogonal condition.

Hope you find this helpful.....Good Luck