Lecture15 - Lecture 15 : Serial Correlation Econ 444,...

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Unformatted text preview: Lecture 15 : Serial Correlation Econ 444, Winter 2010 Mar 8, 2010 Testing for Negative Serial Correlation using DW test H : = no serial correlation H A : < negative serialcorrelation (1) To test for negative serial correlation we take the following steps: 1 Estimate the model by OLS and obtain the DW statistic. 2 Given the sample size (N) and the number of explanatory variables (k) , find the upper (dU) and lower (dL) critical values of the d statistic for a specified level of significance from the table of the d statistic ( Table B4 and B6). 3 Use the following decision rule : If d > 4- dL Reject Null = negative serial correlation. If d < 4- dU Do not reject Null = no negative serial correlation. If 4- dU d 4- dL then DW test is inconclusive. Example for DW test of negative serial correlation Suppose you have data on 25 years with 4 independent variables. Suppose that the DW test statistic is d = 3 . 3. Conduct a one-sided negative serial correlation test at 5% level of siginificance. Remedies for Serial Correlation...
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This note was uploaded on 04/13/2010 for the course ECON 444 taught by Professor Ogaki during the Winter '07 term at Ohio State.

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Lecture15 - Lecture 15 : Serial Correlation Econ 444,...

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