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How do you detect Serial Correlation?

May 28, 2016

Method 1: Use a diagram

Method 2: Do a Durbin-Watson test

For samples of size greater than 25-30

Durbin-Watson test ≈ 2(1-r)

DW Score [0-2) Positive Serial Correlation

DW Score [2] No Serial Correlation

DW Score (2-4] Negative Serial Correlation

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From → Quant

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