Journal Article

Spatial autocorrelation or model misspecification? The help from RESET and the curse of small samples

Author

  • Andrea Vaona
Publication Date

In regression analysis,model misspecification can produce spurious spatial correlation in the residuals. By means of Monte Carlo simulations, I show that the RESET test can help to disentangle this conundrum in large samples. Small samples can pose a serious challenge to finding the correct model.

Info

JEL Classification
R12, C12, C15, R15, C21
DOI
10.1007/s12076-009-0022-z

Key Words

  • Model misspecification
  • Monte Carlo simulations
  • RESET
  • Spatial autocorrelation