AUTOCORRELATION OCCUR WHEN THERE ARE CORRELATION BETWEEN THE VALUES OF THESAME VARIABLES IS BASED ON RELATED OBJECTS

4. - ECONOMETRICS FINAL EXAM FACTORS AFFECTING QUANTITY OF NEW CARS SOLD FOREIGN TRADE UNIVERSITY STUDENTS 4. - ECONOMETRICS FINAL EXAM FACTORS AFFECTING QUANTITY OF NEW CARS SOLD FOREIGN TRADE UNIVERSITY STUDENTS 4. - ECONOMETRICS FINAL EXAM FACTORS AFFECTING QUANTITY OF NEW CARS SOLD FOREIGN TRADE UNIVERSITY STUDENTS
ECONOMETRICS FINAL EXAM FACTORS AFFECTING QUANTITY OF NEW CARS SOLD FOREIGN TRADE UNIVERSITY STUDENTS

4. Autocorrelation:

Autocorrelation occur when there are correlation between the values of the

same variables is based on related objects. The Breusch-Godfrey serial correlation

LM can be used to test for the presence of autocorrelation in time series data test. A

LM-test was carried out to estimate if there were autocorrelation in the residuals.

Hypothesis for the LM test are shown as below:

H

0

:No autocorrelation

H

1

: Autocorrelation exits. If the null hypothesis is rejected, the data is correlated,

and if the null hypothesis is not rejected, there are no autocorrelation.

Figure 7.6: Autocorrelation test (Source: Gretl)

The data of figure 7.6 shows that p-value = 0.257 > = 0.05

=> We have enough evidence to accept Ho

Conclusion: There is no autocorrelation to be found.

Analysis:

Autocorrelation occurs when adjacent residuals are correlated, one residual

can predict the next residual. This correlation represents explanatory information

that the independent variables do not describe. Models that use time-series data are

susceptible to this problem. However, our model does not have autocorrelation,

which means the independent variables explained well the dependent variable.

VIII. Result table:

Variables

Model 1

Model 2