Refer to the data on annual mortgage interest rate (Yt), Exercise 14.41. You fit the simple linear regression model, E(Yt) = β0 + β1t, to the data for the years 1990-2015 (t = 0, 1, 2, c, 25).
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 auto-correlated regression errors.
c. Comment on the validity of the inference concerning model adequacy in light of the result of part b.