TABLE 13-5
The managing partner of an advertising agency believes that his company's sales are related to the industry sales. He uses Microsoft Excel to analyze the last 4 years of quarterly data (i.e., n = 16) with the following results:
-Referring to Table 13-5, the partner wants to test for autocorrelation using the Durbin-Watson statistic. Using a level of significance of 0.05, the decision he should make is
A) there is evidence of autocorrelation.
B) the test is unable to make a definite conclusion.
C) there is no evidence of autocorrelation.
D) there is not enough information to perform the test.

Question

TABLE 13-5
The managing partner of an advertising agency believes that his company's sales are related to the industry sales. He uses Microsoft Excel to analyze the last 4 years of quarterly data (i.e., n = 16) with the following results: 
-Referring to Table 13-5, the partner wants to test for autocorrelation using the Durbin-Watson statistic. Using a level of significance of 0.05, the decision he should make is
A) there is evidence of autocorrelation. 
B) the test is unable to make a definite conclusion. 
C) there is no evidence of autocorrelation. 
D) there is not enough information to perform the test.

Quizplus · Accepted Answer

The critical values for Durbin-Watson dL and dU are 0.410 and 1.630 respectively, for 14 to 18 observations and 1 predictor variable. Since the calculated value of the Durbin-Watson statistic is 1.822, which is greater than dL but less than dU, there is no evidence of positive autocorrelation at the 5% level of significance. Therefore, the partner should make the decision that there is no evidence of autocorrelation.

TABLE 13-5 The Managing Partner of an Advertising Agency Believes That His