ON THE EXACT SMALL SAMPLE DISTRIBUTION OF THE INSTRUMENTAL VARIABLE ESTIMATOR.

The article comments on Nelson and Startz's (1990) discussion of the exact small sample distribution of the instrumental variable (IV) estimator. One of the conclusions that Nelson and Startz derived is that the distribution is bimodal with the probability density equal to zero between the modes. The article points out that the bimodality is a consequence of the special case considered by Nelson and Startz. The authors plot the densities of the exact finite sample distribution of the IV estimator for several parameter values.