The presence of autocorrelation in a time series could result in concluding that the regression coefficient for the trend line is statistically significant when, in reality, it is not.

Question

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Autocorrelation in a time series can inflate the t-statistic of a regression coefficient, leading to the incorrect conclusion that the coefficient is statistically significant when it might not be in the absence of autocorrelation. This is because autocorrelation violates the assumption of independence of errors, which is crucial for valid statistical inference in regression analysis.

The Presence of Autocorrelation in a Time Series Could Result