Posted by Yadira M on Monday, August 17, 2009 at 10:32pm.
When autocorrelation of the residuals is present, what effect can this have on interval estimation and significance tests regarding the regression model involved?

business statistics  MathMate, Tuesday, August 18, 2009 at 8:00am
Most significance tests and interval estimation methods assume randomly sampled observations.
The presence of autocorrelation in the data means that the observations are not random, but correlated to previous values, typical of timeseries related data.
This phenomenon results in null hypotheses indicating the absence of relationships are frequently rejected, for the wrong reason. The presence of an apparent correlation also narrows the estimation intervals and confidence intervals, resulting in a false sense of accuracy of the model.
The statistical test for autocorrelation, the DurbinWatson test is designed to indicate the presence or absence of autocorrelation. The statistic ranges from 0 (positive autocorrelation) to 4 (negative), 2 meaning absence of autocorrelation.

business statistics  Danny, Tuesday, August 18, 2009 at 8:49pm
Hi, MathMate, thank you for your help.
God bless you
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