North-Holland 229 AUTOCORRELATION AND THE SENSITIVITY OF RESET *

@inproceedings{Porter2001NorthHolland2A,
  title={North-Holland 229 AUTOCORRELATION AND THE SENSITIVITY OF RESET *},
  author={Richard D. Porter and Anil Kumar Kashyap},
  year={2001}
}
Ramsey (1969) suggested a test to determine if specification errors are present in standard linear regression models. Consider the following representative of a linear regression: y=xp+u, (1) where y is an N X 1 vector, X is an N X K matrix of predetermined variables having rank K, p is a K X 1 coefficient vector, and II is an N X 1 vector of shocks i.i.d. N(0, a*I). Ramsey’s Regression Specification Error Test (RESET) was developed to test whether E(u 1 X) = 0. Under the assumptions discussed… CONTINUE READING

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