*
*  Example 6.4
*  J. Wooldridge, Econometrics of Cross Section and Panel Data
*
*  Note: The sample data files include all required data transformations.
*        However, in many cases we show how these data transformations would
*        be created in RATS from the basic data, as this is something you will
*        need to know how to do in practice.
*
open data nls80.raw
data(format=free,org=columns) 1 935 wage hours iq kww educ exper tenure age $
  married black south urban sibs brthord meduc feduc lwage
*
set lwage = log(wage)
linreg lwage / resids
# constant exper tenure married south urban black educ
*
* RESET specification test.
* This shows the mechanics of doing the test. At the end of this, we'll show how
* to use a RATS procedure to do this more easily.
*
prj lwagehat
set y2 = lwagehat**2
set y3 = lwagehat**3
set y4 = lwagehat**4
*
* Regress the residuals on the original explanatory variables plus the powers of
* y hat. Use TRSQ as the test statistic. The numerical results differ slightly
* because the test statistic in the text is based upon a rounded R**2.
*
linreg resids
# constant exper tenure married south urban black educ y2 y3
cdf(title="RESET-3rd order") chisqr %trsq 2
linreg resids
# constant exper tenure married south urban black educ y2 y3 y4
cdf(title="RESET-4th order") chisqr %trsq 3
*
* The @RegRESET(h=power) procedure is applied immediately after the regression
* that you want to test.
*
linreg lwage
# constant exper tenure married south urban black educ
@RegRESET(h=3)
@RegRESET(h=4)