Sargan

Sargan is a surname most notably associated with the British econometrician John Denis Sargan. In econometrics, the name is linked to a statistical test used to evaluate the validity of instruments in instrumental variables (IV) or generalized method of moments (GMM) estimation. The test is commonly referred to as Sargan’s test or the Sargan test of overidentifying restrictions.

Sargan’s test is applied after IV or GMM estimation when there are more instruments than endogenous variables. The core idea is to assess whether the instruments are uncorrelated with the error term and correctly excluded from the estimated equation. The test compares the model-implied moments with the observed data, producing a test statistic that, under the null hypothesis of valid instruments, follows a chi-squared distribution with degrees of freedom equal to the number of overidentifying restrictions (the number of instruments minus the number of endogenous regressors). A large statistic indicates that at least some instruments may be invalid.

A robust variant, Hansen’s J test, extends the idea to settings with heteroskedasticity or autocorrelation, maintaining the general purpose of testing instrument validity within the same instrumental variables and GMM framework.

Beyond its use in econometrics, the surname Sargan appears in academic and professional contexts related to individuals bearing the name. The term is distinct from similarly named places and terms and is primarily recognized in statistical and econometric literature through Sargan’s test.