Download or read book On the Geometry of the Instrumental Variable Estimator written by Halvor Mehlum and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: I derive the exact distribution of the exact determined instrumental variable estimator using a geometric approach. The approach provides a decomposition of the exact estimator. The results show that by geometric reasoning one may efficiently derive the distribution of the estimation error. The often striking non-normal shape of the instrumental variable estimator, in the case of weak instruments and small samples, follows intuitively by the geometry of the problem. The method allows for intuitive interpretations of how the shape of the distribution is determined by instrument quality and endogeneity. The approach can also be used when deriving the exact distribution of any ratio of stochastic variables.