* Choosing a functional form * Reference: Section 6.3.3 of * R. Carter Hill, William E. Griffiths and George G. Judge, * Undergraduate Econometrics, Second Edition, Wiley. * SAMPLE 1 48 READ (Y1Y4.shd) R1 R2 R3 YIELD * Generate a time index = 1, 2, ... , 48 GENR TIME=TIME(0) * Simple linear regression - Equation (R6.10), p.136. OLS YIELD TIME / GRAPH * Quadratic term GENR T2=TIME**2 OLS YIELD T2 / GRAPH * Cubic term GENR T3=TIME**3 OLS YIELD T3 / GRAPH * Rescale the variable T3 - Equation (R6.11), p.137. GENR Z3=T3/(10**6) OLS YIELD Z3 / GRAPH STOP