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st: RE: PE-test

From   "Nick Cox" <>
To   <>
Subject   st: RE: PE-test
Date   Thu, 15 Oct 2009 17:53:40 +0100

Often poorly chosen functional forms show themselves up in patterns on a
plot of residuals versus predicted. Conversely, a satisfactory
functional form shows up, after some informal or formal smooth, as a
flat trace on such plots. Naturally, you should check other diagnostics
too, e.g. variance functions. 

I see no reason why this should not apply in broad terms to panel data
too. A disadvantage of this is that it does not produce a P-value or
sharp test decision as you evidently prefer. An advantage is that it is
flexible and allows you to apply scientific as well as statistical


to compare different functional forms such as linear, log log, linlog,
loglin i would like to do a PE-test. I found -logsumm in Stata Bulletin
1992, but this does not fit with Panel data and i am not sure how to
compare others than linear and linlog.
I found the same question in the archive but unfortunatly without

Did anyone use that test in the meantime and could provide some help how
to conduct it manually?

The test is described for example in Verbeek, Marno:A Guide to
Modern Econometrics, 2004 p.61

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