hi,all.
in some relative books,i read about Ramsey regression specification .it says as follows:
if .reg y x1 x2 ,and the fitted value is yhat,then we can regress y with x1 x2 yhat^2 yhat^3,and test if the coef of yhat^2=0 and yhat^3=0 at the same time.
so if i do
. reg price mpg rep78
.ovtest
Ramsey RESET test using powers of the fitted values of price
Ho: model has no omitted variables
F(3, 63) = 1.47
Prob > F = 0.2318
and then
. predict y
.gen y2=y^2
.gen y3=y^3
.qui reg price mpg rep78 y2 y3
.test y2 y3
( 1) y2 = 0
( 2) y3 = 0
Constraint 2 dropped
F( 1, 64) = 0.33
Prob > F = 0.5661
as we can see,the two f-value is different.so it is obvious that stata use a different formula.
and anyone can explain whow it works?
thank you!
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