OVTEST interpretation

[Aishwarya Nahata]

Dear Statalist,

I ran my regression

reg ln_trade contig comlang comcol rta intl ln_dist

Thereafter I ran teh OVTEST to check for model specification errors.
the result I got was:

Ramsey Reset test using powers of teh fitted values of ln_trade

H_o : model has no omitted variables

[INDENT=2]F(3, 19571) = 58.61[/INDENT][INDENT=3]Prob > F = 0.000[/INDENT]
While my P-value is less than the minimum threshold of 0.05, I am not sure how to interprest the overall results. Can you please help me interpret this.

Thank you so much.
AIshwaya

[Carlo Lazzaro]

AIshwaya:
short answer: your model is misspecified.
Long(er) reply: with no other details (ie, data example/excerpt poster via -dataex-) it is difficult (for me, at least) to reply more positively.

[Eric de Souza]

The null hypothesis for the RESET test is that the estimated model is correctly specified as to functional form given the variables included in the regression.
The alternative is quite vague: the estimated model is not correctly specified. No specific form is postulated.
Note that the RESET test only tests whether the right functional form has been used for the variables included in the regression.
It does not test for the absence of other variables. In this sense, it is not a general omitted variables test even though Stata refers to it as the -ovtest- .

[Joao Santos Silva]

Adding to the excellent advice already provided, note that (as far as I know) the test is performed with plain vanilla OLS standard errors and therefore is not valid when you need robust or clustered standard errors. This command really needs an update...

Best wishes,

Joao