Consider the following to answer the question(s) below:
Monthly closing stock prices for a utility company were obtained from January 2014 through August 2015. A regression model was estimated to describe the trend in closing stock prices over time.
-Suppose that for the regression model estimated using the data described, the Durbin-Watson statistic was calculated as 0.5626. Using α = 0.01 we can conclude that
A) there is evidence of positive autocorrelation.
B) there is evidence of negative autocorrelation.
C) there is no evidence of positive autocorrelation.
D) there is no evidence of negative autocorrelation.
E) as dL

Question

Consider the following to answer the question(s) below:
Monthly closing stock prices for a utility company were obtained from January 2014 through August 2015. A regression model was estimated to describe the trend in closing stock prices over time. 
-Suppose that for the regression model estimated using the data described, the Durbin-Watson statistic was calculated as 0.5626. Using α = 0.01 we can conclude that
A) there is evidence of positive autocorrelation. 
B) there is evidence of negative autocorrelation. 
C) there is no evidence of positive autocorrelation. 
D) there is no evidence of negative autocorrelation. 
E) as dL < 0.5626 < dU, the test is inconclusive.

Quizplus · Accepted Answer

The Durbin-Watson statistic ranges from 0 to 4, with values closer to 0 indicating positive autocorrelation and values closer to 4 indicating negative autocorrelation. In this case, the calculated Durbin-Watson statistic of 0.5626 is significantly less than the lower critical value of the Durbin-Watson table at α = 0.01. This indicates that there is evidence of positive autocorrelation in the regression model, meaning that the errors in the model are correlated with each other over time.

Consider the Following to Answer the Question(s) Below