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Non-detection of the serial correlation in least squares regression; frequency and consequences

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  • Kiviet, Jan

Abstract

The robustness and efficiency of OLS statistical inference is assessed in cases where the disturbances are serially correlated. In addition the frequency of accepting independence of the disturbances (and thus the acceptance of OLS results) is considered. An attainable lower bound for the probability of a type two error in testing for serial correlation is established. Case studies indicate that confidence regions for regression coefficients are very sensitive to departures from independence of the disturbances; OLS prediction appears to be more robust. When the sample is small, non-detection of serial correlation will frequently occur. These results suggest a tentative strategy for the detection of serial correlation.

Suggested Citation

  • Kiviet, Jan, 1977. "Non-detection of the serial correlation in least squares regression; frequency and consequences," University of Amsterdam, Actuarial Science and Econometrics Archive 293049, University of Amsterdam, Faculty of Economics and Business.
    • Handle: RePEc:ags:amstas:293049
    DOI: 10.22004/ag.econ.293049
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    Cited by:

    1. Palm, F.C. & Sneek, J.M., 1981. "Some econometric applications of the exact distribution of the ratio of two quadratic forms in normal variates," Serie Research Memoranda 0018, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.

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    Research Methods/ Statistical Methods;

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