Test the hypothesis that there was no autocorrelation versus the alternative of positive autocorrelation in errors
What will be an ideal response?
The appropriate null and alternative hypotheses are H0 : ρ = 0, H1 : ρ > 0.
d = 0.64, n = 30, K = 3.
The cutoff points for the distribution of the Durbin-Watson test statistic are dL = 1.21 and dU = 1.65 (for α= 0.05 ) and dL = 1.01 and dU = 1.42 (for α= 0.01 )
The decision rule is as follows:
Reject H0 if d < dL
Accept H0 if d > dU
Test is inconclusive if dL < d < dU
Since 0.64 < 1.21 and 0.64 < 1.01, we reject H0 at both levels of significance. The Durbin-Watson test gives sufficient evidence to conclude that the errors are positively autocorrelated at both the 5% and 1% levels.
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What will be an ideal response?