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Introduction to Studies in Nonlinear Dynamics & Econometrics Issue in Honor of James B. Ramsey

Introduction to Studies in Nonlinear Dynamics & Econometrics Issue in Honor of James B. Ramsey 1Specification testing and beyondIn graduate school at the University of Wisconsin in the mid-1960s, James was interested in developing procedures for addressing a bold null hypothesis: the regression model is correctly specified. He received a great deal of negative feedback. His advisor, Arnold Zellner, did not think he would succeed, and argued that, even if he accomplished what he wanted to do, no one would believe it. Arthur Goldberger threw James out of his office.Ramsey (1969) pioneered the area of specification testing in regression analysis. This paper focused on testing procedures for the presence of specification errors due to omitted variables, incorrect functional form, simultaneous equation problems, and heteroskedasticity. Of the four tests introduced, the RESET test became the most well known and frequently used in applied work. In the original formulation, the tests were based on the use of BLUS residuals. Ramsey and Schmidt (1976) modified the RESET test for use with OLS residuals and showed that this modification was equivalent to the running the test with BLUS residuals. Given the relative ease of obtaining OLS residuals, this likely was a factor behind the RESET test’s subsequent popularity. The test became a part of the standard toolkit for http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Studies in Nonlinear Dynamics & Econometrics de Gruyter

Introduction to Studies in Nonlinear Dynamics & Econometrics Issue in Honor of James B. Ramsey

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Publisher
de Gruyter
Copyright
©2016 Walter de Gruyter GmbH, Berlin/Boston
ISSN
1558-3708
eISSN
1558-3708
DOI
10.1515/snde-2016-6001
Publisher site
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Abstract

1Specification testing and beyondIn graduate school at the University of Wisconsin in the mid-1960s, James was interested in developing procedures for addressing a bold null hypothesis: the regression model is correctly specified. He received a great deal of negative feedback. His advisor, Arnold Zellner, did not think he would succeed, and argued that, even if he accomplished what he wanted to do, no one would believe it. Arthur Goldberger threw James out of his office.Ramsey (1969) pioneered the area of specification testing in regression analysis. This paper focused on testing procedures for the presence of specification errors due to omitted variables, incorrect functional form, simultaneous equation problems, and heteroskedasticity. Of the four tests introduced, the RESET test became the most well known and frequently used in applied work. In the original formulation, the tests were based on the use of BLUS residuals. Ramsey and Schmidt (1976) modified the RESET test for use with OLS residuals and showed that this modification was equivalent to the running the test with BLUS residuals. Given the relative ease of obtaining OLS residuals, this likely was a factor behind the RESET test’s subsequent popularity. The test became a part of the standard toolkit for

Journal

Studies in Nonlinear Dynamics & Econometrics – de Gruyter

Published: Sep 1, 2016

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