4. Explain the RESET test as a general test for functional form misspecification and discuss the drawbacks and advantages of this test. In your answer consider the following multiple linear regression model: i=1, .,n,

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4. Explain the RESET test as a general test for functional form misspecification and discuss
the drawbacks and advantages of this test.
In your answer consider the following multiple linear regression model:
4 = 1 + 722 + 73#3 + 4
i= 1,.,n,
where a, and #3, are exogenous variables known to affect E(y.).
Transcribed Image Text:4. Explain the RESET test as a general test for functional form misspecification and discuss the drawbacks and advantages of this test. In your answer consider the following multiple linear regression model: 4 = 1 + 722 + 73#3 + 4 i= 1,.,n, where a, and #3, are exogenous variables known to affect E(y.).
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