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Size and Power of the RESET Test as Applied to Systems of Equations: A Bootstrap Approach

Mantalos, Panagiotis LU (2004) In Journal of Modern Applied Statistical Methods 3(2). p.370-385
Abstract
The size and power of various generalization of the RESET test for functional misspecification are investigated, using the “Bootsrap critical values”, in systems ranging from one to ten equations. The properties of 8 versions of the test are studied using Monte Carlo methods. The results are then compared with another study of Shukur and Edgerton (2002), in which they used the asymptotic critical values instead and found that in general only one version of the tests works well regarding size properties. In our study, when applying the bootstrap critical values, we find that all the tests exhibits correct size even in large systems. The power of the test is low, however, when the number of equations grows and the correlation between the... (More)
The size and power of various generalization of the RESET test for functional misspecification are investigated, using the “Bootsrap critical values”, in systems ranging from one to ten equations. The properties of 8 versions of the test are studied using Monte Carlo methods. The results are then compared with another study of Shukur and Edgerton (2002), in which they used the asymptotic critical values instead and found that in general only one version of the tests works well regarding size properties. In our study, when applying the bootstrap critical values, we find that all the tests exhibits correct size even in large systems. The power of the test is low, however, when the number of equations grows and the correlation between the omitted variables and the RESET proxies is small. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
RESET, Systems of Equations, bootstrap
in
Journal of Modern Applied Statistical Methods
volume
3
issue
2
pages
370 - 385
publisher
JMASM
external identifiers
  • scopus:18344373312
ISSN
1538-9472
language
English
LU publication?
yes
id
4c1fe452-c679-426e-8ee4-72cb5cd70523 (old id 1387081)
alternative location
http://tbf.coe.wayne.edu/jmasm/vol3_no2.pdf
date added to LUP
2009-04-20 12:27:24
date last changed
2017-01-01 07:27:35
@article{4c1fe452-c679-426e-8ee4-72cb5cd70523,
  abstract     = {The size and power of various generalization of the RESET test for functional misspecification are investigated, using the “Bootsrap critical values”, in systems ranging from one to ten equations. The properties of 8 versions of the test are studied using Monte Carlo methods. The results are then compared with another study of Shukur and Edgerton (2002), in which they used the asymptotic critical values instead and found that in general only one version of the tests works well regarding size properties. In our study, when applying the bootstrap critical values, we find that all the tests exhibits correct size even in large systems. The power of the test is low, however, when the number of equations grows and the correlation between the omitted variables and the RESET proxies is small.},
  author       = {Mantalos, Panagiotis},
  issn         = {1538-9472},
  keyword      = {RESET,Systems of Equations,bootstrap},
  language     = {eng},
  number       = {2},
  pages        = {370--385},
  publisher    = {JMASM},
  series       = {Journal of Modern Applied Statistical Methods},
  title        = {Size and Power of the RESET Test as Applied to Systems of Equations: A Bootstrap Approach},
  volume       = {3},
  year         = {2004},
}