Robust Specification Testing in Regression: The FRESET Test and Autocorrelated Disturbances

Linda F. DeBenedictis, () and David Giles

No 9806, Econometrics Working Papers from Department of Economics, University of Victoria

Abstract: This study investigates the degree of size-distortion of the RESET, FRESETL and FRESETS tests, and their ability to reject falsely specified models in terms of an omitted variable, in the presence of autocorrelation. Specifically, in the presence of AR(1) and MA(1) processes, respectively. We also explore the properties of the corresponding tests when the robust error covariance matrix estimator of Newey and West (1987) is used in the construction of the tests. Our results indicated that the FRESET tests performed equally as well as, and in many cases yield higher "power" than the comparable RESET test. The dominance of the FRESET tests was even more pronounced when a Newey-West correction for autocorrelation was used as evidenced by higher rejection rates.

Keywords: Specification Analysis; RESET test; Autocorrelation (search for similar items in EconPapers)
JEL-codes: C12 (search for similar items in EconPapers)
Pages: 13 pages
Date: 1998-05-27
New Economics Papers: this item is included in nep-ecm, nep-eec and nep-ets
Note: ISSN 1485-6441
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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