Which is the best method for overcoming the autocorrelation

Assignment Help Other Subject

Reference no: EM132412066

Questions -

Q1. An econometrician suspects that the residuals (u_t's) of her\his model might be auto-correlated. Explain the steps involved in testing this theory using the Durbin-Watson (DW) test.

Q2. The econometrician follows your guidance in question (4) and calculates a value for the Durbin-Watson statistic of 0.95. The regression has 60 quarterly observations and 3 explanatory variables (plus a constant term). Perform the test. What is your conclusion?

Q3. With reference to the following regression using 45 observations:

y^{^}_t = 0.98 + 0.56x_t

(0.32) (0.14)

DW = 1.52, R² = 0.4

(standard errors in brackets)

i) Interpret the above R² statistic and determine if x_t is significantly different to 0 (t-statistic).

ii) Is there any evidence of 1^st order autocorrelation.

Q4. Given the following model: y_t = α + βx_t + u_t

Explain how you would conduct the LM test for higher order autocorrelation. If you were testing for 4^th order autocorrelation and your LM statistic was 27.8, is there any evidence of 4^th order autocorrelation being present?

Q5. To overcome autocorrelation in a regression, two separate models are estimated based on the original model:

y_t = α + βx_t + u_t

The first attempt involves a generalised difference equation using the Cochrane-Orcutt and produces a RSS of 0.79. The second regression uses an unrestricted version of the model and produces a RSS of 0.56. Using the Common Factor test and that there are 32 observations, which is the best method for overcoming the autocorrelation?

Q6. Which of the following hypotheses about the coefficient can be tested using a t-test? Which of them can be tested using an F-test? In each case, state the number of restrictions.

(a) H₀: β₃ = 2

(b) H₀: β₃ + β₄ = 1

(d) H₀: β₂ = 0 and β₃ = 0 and β₄ = 0 and β₅ = 0

(e) H₀: β₂β₃ = 1.

Reference no: EM132412066

Questions Cloud

How can you use clinical significance in your project : Not all EBP projects result in statistically significant results. Define clinical significance, and explain the difference between clinical and statistical.

Finding a solution for a linear programming exercise : A problem may occur if we add too many constraints. In this case, it is possible to not obtain a solution. What should we do in such cases?

Level of differentiation across the firm offerings : Network externalities, multi-housing costs, level of differentiation across the firm's offerings? (use theory/frameworks to justify your position)

What step of the organizational socialization process : What step of the organizational socialization process is an employee in who is learning all aspects of a business in order to develop mastery in one or more

Which is the best method for overcoming the autocorrelation : Using the Common Factor test and that there are 32 observations, which is the best method for overcoming the autocorrelation

What steps must pepsi cola take to become dominant : What steps must Pepsi Cola take to become dominant in its current markets? Please cite examples and be very specific in your recommendations

Sir alex ferguson case study : How has Manchester United closen to compete in the world of European football, on and off the field? When it comes to the club's approach to recruiting

What is the impact of these sdoh on the family : Identify the social determinates of health (SDOH) contributing to the family's health status. In a 750-1,000-word paper, create a plan of action to incorporate.

Create economic value by offering financial services : What capabilities and competencies does the USPS have that would enable it to create economic value by offering financial services?

User Account

All Pages