timeseries2

timeseries2 - Economics 20 - Prof. Anderson 1 Time Series...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Economics 20 - Prof. Anderson 1 Time Series Data y t = + 1 x t1 + . . .+ k x tk + u t 2. Further Issues Economics 20 - Prof. Anderson 2 Testing for AR(1) Serial Correlation Want to be able to test for whether the errors are serially correlated or not Want to test the null that = 0 in u t = u t-1 + e t , t =2,, n , where u t is the model error term and e t is iid With strictly exogenous regressors, the test is very straightforward simply regress the residuals on lagged residuals and use a t-test Economics 20 - Prof. Anderson 3 Testing for AR(1) Serial Correlation (continued) An alternative is the Durbin-Watson (DW) statistic, which is calculated by many packages If the DW statistic is around 2, then we can reject serial correlation, while if it is significantly < 2 we cannot reject Critical values are difficult to calculate, making the t test easier to work with Economics 20 - Prof. Anderson 4 Testing for AR(1) Serial Correlation (continued) If the regressors are not strictly exogenous, then neither the t or DW test will work Regress the residual (or y ) on the lagged residual and all of the x s The inclusion of the x s allows each x tj to be correlated with u t-1 , so dont need assumption of strict exogeneity Economics 20 - Prof. Anderson 5 Testing for Higher Order S.C. Can test for AR( q ) serial correlation in the same basic manner as AR(1) Just include q lags of the residuals in the regression and test for joint significance Can use F test or LM test, where the LM version is called a Breusch-Godfrey test and is ( n-q ) R 2 using R 2 from residual regression Can also test for seasonal forms Economics 20 - Prof. Anderson 6 Correcting for Serial Correlation Start with case of strictly exogenous regressors, and maintain all G-M...
View Full Document

Page1 / 20

timeseries2 - Economics 20 - Prof. Anderson 1 Time Series...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online