What are remedies for a failed Ramsey RESET ?

[mwai mwai]

What do you you do when a RESET test tells you you have omiited variable?

[Joseph Chrestien]

RESET test is not supposed to be about omitted variables, but about functional misspecification. Perhaps you should have a look at this video : https://www.youtube.com/watch?v=QWiGWYmtWc8 and/or this document : http://www.personal.rhul.ac.uk/uhte/...le%20Tests.pdf

By the way, it is Statalist etiquette to use full name as username ;-).

Cheers,
Jo Chrestien

[Marcos Almeida]

You are dealing with error-specification due to omitted variables. If we take a look in the Stata Reference Manual, we read that:

Omitted variables are a more serious problem than heteroskedasticity or the violations of higher momment conditions

The null hypothesis of the Ramsey test is the lack of omitted variables. Therefore, the way to cope with the issue includes, well, variables. Naturally, modeling must stem from the rationale as well.
Best,

Marcos

[Carlo Lazzaro]

mwai mwai (I do share Joseph's remark about using full names on the list. Thanks).
As an aside to previous helpful insights, some months ago there was an interesting thread on this topic: http://www.statalist.org/forums/foru...-variables-are.
Usually, there is a limited set of measures that you can try (interactions among predictors are included in the list), which are covered in any decent handbook of econometrics.