Inference with Weak Instruments
This paper reviews recent developments in methods for dealing with weak instruments (IVs) in IV regression models. The focus is more on tests (and conﬁdence intervals derived from tests) than estimators. The paper also presents new testing results under “many weak IV asymptotics,” which are relevant when the number of IVs is large and the coeﬀicients on the IVs are relatively small. Asymptotic power envelopes for invariant tests are established. Power comparisons of the conditional likelihood ratio (CLR), Anderson-Rubin, and Lagrange multiplier tests are made. Numerical results show that the CLR test is on the asymptotic power envelope. This holds no matter what the relative magnitude of the IV strength to the number of IVs.
Andrews, Donald W.K. and Stock, James H., "Inference with Weak Instruments" (2005). Cowles Foundation Discussion Papers. 1816.