# PS6.10, for LM test application in Example 6.7. 
open data4-8
# First generate squared variables.  
square home inst svc tv age air y  
# estimate basic model 
ols sub const home inst svc tv age air y  
genr ut=$uhat
# estimate auxiliary regression 
ols ut const home inst svc tv age air y sq_home sq_inst sq_svc sq_tv \
 sq_age sq_air sq_y  
# compute LM test statistic 
genr LM = $nrsq
# compute pvalue 
pvalue X 7 LM
# from auxiliary regression add variables to basic model 
ols sub const home inst svc tv age air y sq_home sq_age sq_air sq_y  
# carry out data-based model reduction 
omit svc  
omit sq_home  
omit inst  
# final model with all coefficients significant at 10 percent level 
omit tv  
#  estimate most general model using the Hendry/LSE approach 
ols sub const home inst svc tv age air y sq_home sq_inst sq_svc sq_tv \
 sq_age sq_air sq_y  
# carry out data-based model reduction on this 
omit inst tv sq_inst  
omit svc sq_svc  
omit sq_home  
# note that the final model is identical to the one above 
omit sq_tv 
