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QUESTION
Suppose the RESET test rejects its null hypothesis. What should you do?
Suppose the RESET test rejects its null hypothesis. What should you do?
A Continue with the original model you have
B Add to the model the squares and cubes of all explanatory variables in the original model
C Work with the unrestricted model that was estimated for the RESET test.
D Search for appropriate nonlinear functions of the explanatory variables in the original model and add them as additional regressors.
