

Question : Autocorrelation: DurbinWatson tests




Hi xperts,
I am using the attached sheet models to run DurbinWatson tests. The above example is for 2 regressors.
How can I use the same model to test autocorrelation of time series to itself?
I guess, I can replace the 2nd series (MSCI) to a simple incrementing series like 1,2,3,4,....n
Is it a correct way of running DW test for a single series?
Thanks




Answer : Autocorrelation: DurbinWatson tests


No, I'm afraid it doesn't. The straight line cannot lag or anticipate, since it's straight. Also, since there is no correlation, there cannot be any autocorrelation of the regression. Finally, if if it did make sense, the residual errors will be so large that the tiny variations between two tracks measured by DW will be totally drowned.
In econometrics, you tent to look for autocorrelations over the base period (the month in your data) or some meaningful time frame (yearly variations in crop and weather related values). There are also several techniques to test for randomness of absolute returns (are too many positive or negative returns following each other).
DW gives the impression that it doesn't require a time frame in the hypothesis. You want a measure of autocorrelation without choosing a time frame, so you try to bend DW to your needs.
I don't know what I can add, really. You can make any computation you like, but it will not be a test, it will be exploratory statistics, or, if you are really lucky, descriptive statistics.
(°v°)



