Review Quiz 1-04: Model Specification and Misspecification Testing

Review Quiz 1-04: Model Specification and Misspecification Testing (11 questions)

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Optional: Video on the LM Test By Auxiliary Regression (9:30 minutes)

We use the LM test for misspecification tests. The video explains how and why the LM test statistics can be derived by estimating an auxiliary regression, which means that we estimate a specific linear regression model in order to get the test statistics for the LM test in an easy way.

Note that the video is optional and not part of the curriculum.