Explain what is meant by autocorrelated errors. What effects does autocorrelation have on the results of a regression?
What will be an ideal response?
Autocorrelated errors occur when the errors in a regression model are no longer independent. The hypothesis tests and confidence intervals in multiple regression assume that the errors are independent. If the errors are not independent, then the estimated standard errors for the coefficients are biased. For example, it can be shown that, if there is a positive correlation between the error terms, then the least-squares estimate of the coefficient standard coefficient will be too large. This could lead us to conclude that certain coefficients are significantly different from 0 - by rejecting H0 : ?j = 0 - when, in fact, H0 should not be rejected. In addition, estimated confidence intervals would be too narrow.
You might also like to view...
A single-sampling plan by attributes is needed for a purchased component. Given the following information, what is the producer's risk? Table G.1 is appended to this exam
Sample size = 75 Acceptance number (c) = 2 Acceptance quality level (AQL ) = 0.01 Lot tolerance proportion defective (LTPD) = 0.04 A) .01 B) .02 C) .03 D) .04
What is time-series information?
A. Analyzes checkout scanner information. B. Time-stamped information collected at a particular frequency. C. Reveals the degree to which variables are related. D. All of the above.
Under the Equal Credit Opportunity Act, a creditor is permitted to:
a. request any information they think necessary to make a decision about a credit applicant b. discriminate against an applicant based on marital status c. consider information about indirect credit history of an applicant d. ask questions about applicant's plans to have children in order to calculate impact on future income e. none of the other choices
A scatter diagram reveals a strong positive linear relationship between oil and gasoline prices. Which of the following numerical techniques will not give us more detailed information about this relationship?
a. Coefficient of determination b. Coefficient of correlation c. Coefficient of variation. d. All of these choices help us describe this relationship.