In 2SLS,how should the strength of an instrument be measured? A)an F-test on the first stage regression equation B)the p-value of the instrument's coefficient in the second stage regression C)the R² in the first stage regression equation D)an F-test on the second stage regression equation

Question

Quizplus · Accepted Answer

The strength of an instrument in 2SLS should be measured using an F-test on the first stage regression equation. This test measures the significance of the instrument in predicting the endogenous variable in the first stage regression. A high F-statistic indicates a strong instrument, and a low F-statistic indicates a weak instrument. Therefore, option A is the best choice.

In 2SLS,how Should the Strength of an Instrument Be Measured