Refer to the annual data on number of life insurance policies in force 1Yt2, Exercise 14.45. You fit the simple linear regression model, E(Yt) = β0 + β1t, to the data for the years 1985 to 2014. (t = 1, 2, c, 30).
a. Find and plot the regression residuals against t. Does the plot suggest the presence of autocorrelation? Explain.
b. Conduct the Durbin-Watson test (at α = .05) to test formally for the presence of positively autocorrelated regression errors.
c. Comment on the validity of the inference concerning model adequacy in light of the result of part b.