Model Selection

U-Shape Test using "Two Lines" - A Simple Solution for Discrete IV

Motivation Two-lines Approaches Issue with Discrete Dependent Variable Motivation In this paper by Uri Simonsohn (2017), the author proposed a noval method to test U-Shape relationship. In the literature, the popular way of testing U-shapeness relationship between x and y is to add a quadratic term in the regression (y=\beta_0+\beta_1 x + \beta_2 x^2 +\epsilon) ((\epsilon) is an i.i.d noise). If (\beta_1) is statistitally significant, then the relationship betewen x and y are U-shape.