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welcome back this video explains the omitted variable bias this is a common problem in regression analysis that is caused by omitting an important explanatory variable from your regression model if that occurs it will bias all your estimated coefficients now this video will explain how to detect an omitted variable bias and most importantly how to fix it the ramsey reset test actually tests for non-linear relationships but is also very powerful to detect an omitted variable bias to understand the link between the two you have to have in mind if you omit an important variable from your model then you donamp;#39;t know what you actually omitted you forgot about something important so how would you be able to test for it now the idea of the ramsey reset test is to include higher powers of your fitted values or your independent variables and if this addition to your model increases the predictive power of your model it is an indication that your model is incomplete or it is an indication