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Interpretation RESET-Test: Problems with different test options
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Interpretation RESET-Test: Problems with different test options
Date
Wed, 17 Nov 2010 10:43:08 +0100
Dear STATA community,
in order to test for specification errors I use the RESET-test. I
understand that RESET is not a test for omitted variables but more a test
looking for non-linearities.
I have two problems as to the interpretation of my results:
1. There is a striking difference of the RESET test using powers of the
fitted values of the dependent variable (default-option) and using powers
of the independent variables (rhs-option). In the first case with my data
set the Ho has to be rejected (5%-level). In the second case the Ho can
not be rejected even at the 40%-level. For sure this has something to do
with a difference of the dependent and independet variables but is there
any precise explanation as to this difference?
2. I run a multiple regression. The RESET-test (default-option) does not
reject the Ho of correct specification (10% level). I run a regression
with the same dependent variable and the same independent variables but in
addition I include one other independent variable: Now the RESET-test
(default-option) rejects the Ho of correct specification. To my opinion
including additional variables should reduce the probability of omitting
variables and neglecting non-linearities.
In advance many thanks for any suggestions.
Matthias
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