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Remarks on correlated error tests
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 Title & Authors
Remarks on correlated error tests
Kim, Tae Yoon; Ha, Jeongcheol;
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 Abstract
The Durbin-Watson (DW) test in regression model and the Ljung-Box (LB) test in ARMA (autoregressive moving average) model are typical examples of correlated error tests. The DW test is used for detecting autocorrelation of errors using the residuals from a regression analysis. The LB test is used for specifying the correct ARMA model using the first some sample autocorrelations based on the residuals of a tted ARMA model. In this article, simulations with four data generating processes have been carried out to evaluate their performances as correlated error tests. Our simulations show that the DW test is severely dependent on the assumed AR(1) model but isn't sensitive enough to reject the misspecified model and that the LB test reports lackluster performance in general.
 Keywords
Correlated error;Durbin-Watson test;Ljung-Box test;model specification;
 Language
English
 Cited by
 References
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