@@researchpedia6094 Thank you for the reply, but also my point is not specifically about roa roe. I mean instrument should be an alternative one of same kind or should it be something with explanatory power on end.var?
@@researchpedia6094 sorry but can’t agree with that, in stata corp’s official video, in simple example they give parent’s education as instrument of student education, assuming if parent is educated, s/he will educate the child better, roe has no such a relationship nor the profit measures
Thank you for the great explanation. Do you have a book that I can use a reference that explains the GMM?
Why ROA is correlated with error term, but why ROE not correlated, what is the logic behind this?
Dear, it is just a discussion in order to differentiate b/w endogenous and instrument variable.
@@researchpedia6094 Thank you for the reply, but also my point is not specifically about roa roe. I mean instrument should be an alternative one of same kind or should it be something with explanatory power on end.var?
@@user-kr4pm3wq9x It should be an alternative to your endogenous.
@@researchpedia6094 sorry but can’t agree with that, in stata corp’s official video, in simple example they give parent’s education as instrument of student education, assuming if parent is educated, s/he will educate the child better, roe has no such a relationship nor the profit measures
@@user-kr4pm3wq9x both are education dear. You need to study about Endogeneity in detail from relevant text thoroughly to eradicate your confusion.