Which of the following is true of Regression Specification Error Test (RESET)?
A)It tests if the functional form of a regression model is misspecified.
B)It detects the presence of dummy variables in a regression model.
C)It helps in the detection of heteroskedasticity when the functional form of the model is correctly specified.
D)It helps in the detection of multicollinearity among the independent variables in a regression model.

Question

Quizplus · Accepted Answer

RESET tests whether the functional form of a regression model is misspecified by examining the residuals of the regression. Option B is incorrect because the presence of dummy variables does not require a RESET test. Option C is incorrect because RESET is not used to detect heteroskedasticity. Option D is incorrect because RESET is not used to detect multicollinearity.

Which of the Following Is True of Regression Specification Error