* R. Carter Hill, William E. Griffiths and Guay C. Lim, * Principles of Econometrics, Fourth Edition, Wiley, 2011. * Chapter 6.3 Model Specification SAMPLE 1 428 READ (edu_inc.dat) / names * Summary statistics (Table 6.1, p. 235) STAT FAMINC HEDU WEDU KL6 X5 X6 / PCOR MEAN=dataMean * Estimate a family income model (Equation 6.20, p. 234) OLS FAMINC HEDU WEDU * Now omit an important variable and consider how this affects the * estimated coefficient on the variable HEDU (Equation 6.21, p. 234). OLS FAMINC HEDU * Include more important variables in the family income model * (Equation 6.24, p. 235). OLS FAMINC HEDU WEDU KL6 * The RESET test (bottom of p. 239). * The DIAGNOS command generates diagnostic test statistics for * the previous OLS command. The RESET option reports: * - RESET(2) = RESET test obtained by augmenting the model with * the squares of the predictions. * - RESET(3) = RESET test obtained by augmenting the model with * the squares and cubes of the predictions. DIAGNOS / RESET * The RESET test may have numerical problems with an ill-conditioned * data set arising from the inclusion of cubic terms of the fitted values. * It may be sensible to rescale the data and measure the dependent * variable as deviations from mean. * The next commands repeat the RESET test using a dependent variable * expressed as deviations from mean. GENR FAMdev=FAMINC-dataMean:1 OLS FAMdev HEDU WEDU KL6 DIAGNOS / RESET * Now add two Irrelevant Variables and consider how this affects * the results (equation top of p. 236). OLS FAMINC HEDU WEDU KL6 X5 X6 STOP