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Re: st: How -ovtest- works?


From   Andreas Kuhn <[email protected]>
To   [email protected]
Subject   Re: st: How -ovtest- works?
Date   Wed, 09 Jun 2004 19:04:00 +0200

UENOHARA Hideaki wrote:
Dear all,

I want to know how -ovtest- works.

In my understanding, the RESET procedure is as follows:
1. regress Y on X_1, ... ,X_k, and obtain Yhat.
2. calculate Yhat^2 and Yhat^3.
3. regress Y on X_1, ... ,X_k, and Yhat^2, Yhat^3.
4. test the null that Yhat^2 = Yhat^3 = 0.

But in Stata, -ovtest- does not seem to be identical to this procedure,
as the example below shows.
Does anyone know how -ovtest- is working in Stata?

---
. sysuse auto
. reg price mpg weight foreign
. predict y
. gen y2=y^2
. gen y3=y^3
. reg price mpg weight foreign y2 y3
. test y2 y3

 ( 1)  y2 = 0
 ( 2)  y3 = 0
       Constraint 2 dropped

       F(  1,    68) =    3.90
            Prob > F =    0.0523

. quietly reg price mpg weight foreign
. ovtest

Ramsey RESET test using powers of the fitted values of price
       Ho:  model has no omitted variables
                  F(3, 67) =     15.31
                  Prob > F =      0.0000
---



UENOHARA Hideaki, LL.M. <[email protected]>
 Doctoral Student, Graduate School of Law and Politics,
 The University of Tokyo


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- ovtest - also includes the fourth power of yhat as a regressor. thus, including yhat^4 in your regression should give the same result as ovtest.

andreas

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