* R. Carter Hill, William E. Griffiths and Guay C. Lim, * Principles of Econometrics, Third Edition, Wiley, 2008. * Chapter 4.3.5 An example of choosing a functional form (pp. 90-92) SAMPLE 1 48 READ (wa-wheat.shd) R1 R2 R3 YIELD * Generate a time index = 1, 2, ... , 48 GENR TIME=TIME(0) * Simple linear regression (Estimation results p. 91) 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 (Estimation results p. 93) GENR Z3=T3/(10**6) OLS YIELD Z3 / GRAPH STOP