Plot of the regression residuals

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Reference no: EM1385703

The consumer purchasing value of the dollar, Yt, from 1970 to 2010 is illustrated by the data in the table in the next column. The buying power of the dollar (compared with 1982) is listed for each year. The first-order model:

Yt = b0 + b1t + e

was fit to the data using the method of least squares. The Minitab printout and a plot of the regression residuals
follow.

a) Examine the plot of the regression residuals against t. Is there a tendency for the residuals to have long positive and negative runs? To what do you attribute this phenomenon?

b) Locate the Durbin-Watson d-statistic on the printout and test the null hypothesis that the time series residuals are uncorrelated. Use a = .10.

c) What assumption(s) must be satisfied in order for the test of part b to be valid?

Reference no: EM1385703

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