Durbin Watson In a multiple regression analysis containing four explanatory variables plus a constant with 50...

Durbin Watson

In a multiple regression analysis containing four explanatory variables plus a constant with 50 data points, suppose that the errors are serially correlated and test is applied to the regression to investigate this issue. The test statistic takes a value of 2.92 with 5 % significance level.

1- Identify the problem that the researcher may face?

2- What is the appropriate test and conclusion when the researcher test this issue? (State the hypothesis tests, all critical values, test statistics and conclusion)

Expert Solution

1.The problem researcher may likely face could be traced to reliability of the research instruments or cost of the research and limitation of the study.

2. The most appropriate or suitable test for serial correlation or auto correlation detection is Durbin Watson test and the conclusion will be that if the Durbin Watson Statistics d lies between 1.5 and 2.5, then there is no autocorrelation but if otherwise there is auto correlation

Hypothesis

Null Hypothesis: there is no auto correlation
Alternative hypothesis: there is auto correlation

If P-value is less than 0.05 we reject the null hypothesis and conclude that there is an existence of auto correlation but if P-value is greater than 0.05 we cannot reject null hypothesis and we conclude that there is no autocorrelation or serial correlation. In the same vein, if the test statistic value is greater than table value, you reject Null hypothesis but if otherwise do not reject the null Hypothesis.

orchestra answered 2 years ago

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