# Question

The omission of an important independent variable from a time-series regression model can result in the appearance of auto correlated errors. In Example 13.7 we estimated the model

yt = β0 + β1x1t + εt

relating profit margin to net revenue per dollar for our savings and loan data. Carry out a Durbin-Watson test on the residuals from this model. What can you infer from the results?

yt = β0 + β1x1t + εt

relating profit margin to net revenue per dollar for our savings and loan data. Carry out a Durbin-Watson test on the residuals from this model. What can you infer from the results?

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