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Econometrics

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Moderate

Visual Test for Serial Autocorrelation: Conclusions

EMETRC-AYL6FF

Suppose that you estimate an OLS regression and then plot the estimated residuals $\hat{\varepsilon}_t$ against the lag value of those residuals $\hat{\varepsilon}_{t-1}$ and observe that higher values of $\hat{\varepsilon}_t$ are associated with higher values of $\hat{\varepsilon}_{t-1}$.

What can you conclude?

A

There is visual suggestive evidence of positive serial autocorrelation.

B

There is visual suggestive evidence of negative serial autocorrelation.

C

There is visual suggestive evidence of heteroskedasticity.

D

There is no visual evidence of either serial correlation or heteroskedasticity.

E

There is visual evidence of an omitted variable bias.