This paper gives a relatively simple, well behaved solution to the problem of many instruments in heteroskedastic data. Such settings are common in microeconometric applications where many instruments are used to improve efficiency and allowance for heteroskedasticity is generally important. The solution is a Fuller (1977) like estimator and standard errors that are robust to heteroskedasticity and many instruments. We show that the estimator has finite moments and high asymptotic efficiency in a range of cases.
Instrumental Variable Estimation with Heteroskedasticity and Many InstrumentsJ.A. Hausman, W.K. Newey, T. Woutersen, J.C. Chao, and N.R. Swanson ,
2( 3 )