Question

Consider the model, Yt = Bo + B1 Xt + Ut, and this is estimated using OLS with 65 observations. However, it is suspected autocorrelation is present. You compute the DW statistic as 1.64. The critical values for this model are: du = 1.407 and du = 1.467. What is your decision? O A. Reject the null O B. Fail to reject the null. O C. Undetermined or inconclusive.

Answer 1

Question)

Consider the model Yt=Bo+B1Xt+Ut and this is estimated using OLS with 65 observation. However, it is suspected autocorrelation present. You compute the DW statistics as 1.64. The critical values for this model are; d_L=1.407 and d_U=1.467. What is your decision?

Answer:

Since DW statistics is d=1.64 and d>d_U, we fails to reject null.

Therefore answer is : B. Fails to reject null.

Explanation:

We can use the decision rule of DW test and solve the problem.

IS 65 The gives regression model is Y+ = Bot Bixt tuz Where YE response variable ext timet xt is predictor ranable at timet The given model estimated using oLs method with observation.. Since the it is suspected autocorrelation is present so we have to test because there is assumption in regression is that residual are a un correlated to each other. so to hest autcorelation present not, we use Durbin watson test The hypothesis considered in DN test 8=0 (Autcorrelation is zeno) The Ha i go ( presence of positive outconsekt D.IN. test statistic en Ž (et-ld-y)? IS 2-2 d Že, ² t-1 Where - et Y -Y are residual n = number of observation.

Ne get = 164 The By wing Durbin watson + able the lower and upper critical value ca and dy ) is d =1.407 du = 1.467. To test Hor8=0 H, 8 70 the decision criteria is verses If d<dy reject Hot 8=0 If d> do, do not reject Her f=0 If dLedz do test is in conclusive. El. Since here d> du, we do not reject Hoi-8=0 Hoi 8=0 and conclude that there is prese the positive auto correlation Therefore, Answer (B Fail to reject the null. present is