When applying the first-order autoregressive model, Knight wants to conduct some tests to ensure the model is producing meaningful results. In order to do this, Knight comments that he must test whether the:
- Test 1: Durbin-Watson statistic differs significantly from 2.
- Test 2: residual autocorrelations differ significantly from 0.
- Test 3: intercept and coefficient on the first lag differ significantly from 0.
Of the three tests Knight indicates he would like to conduct for the first-order autoregressive model, which is most likely appropriate to test for serial correlation in the model?
- Test 1
- Test 2
- Test 3
What is simple explanation of the 1st Test and why its wrong Answer 2 is right???
test 1 is wrong because in an AR model, durbin watson test results are not valid