J.G. de Gooijer
- Lagged regression residuals and serial-correlation tests
- Journal of Business & Economic Statistics
- Volume | Issue number
- Pages (from-to)
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
A new family of statistics is proposed to test for the presence of serial correlationin linear regression models. The tests are based on partial sums of lagged cross-products of regression residuals that define a class of interesting Gaussian processes. These processes are characterized in terms of regressor functions, the serial-correlation structure, the distribution of the noise process, and the order of the lag of the cross-products of residuals. It is shown that these four factors affect the lagged residual processes independently. Large-sample distributional results are presented for test statistics under the null hypothesis of no serial correlationon for alternatives from a range of interesting hypotheses. Some indication of the circumstances to which the asymptotic results apply in finite-sample situations and of those to which they should be applied with some caution are obtained through a simulation study. Tables of selected quantiles of the proposed tests are also given. The tests are illustrated with two examples taken from the empirical literature. It is also proposed that plots of lagged residual processes be used as diagnostic tools to gain insight into the correlation structure of residuals derived from regression fits.
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