If there is a first order positive autocorrelation in the error term in the equation and this is due to a specification error,which of the following is the best solution to overcome this problem? a)If there are variables that should be included in the equation but are not considered,these excluded variables are included or the mathematical form of the equation can be revised b)Autocorrelation may have occured due to the relationship between two explanatory variables.One or both of these variables must be removed from the equation c)The equation is estimated by the Maximum Likelihood method after taking the first difference d)Equation should be estimated by Generalized Least Squares - GLS method
Correlation
Correlation defines a relationship between two independent variables. It tells the degree to which variables move in relation to each other. When two sets of data are related to each other, there is a correlation between them.
Linear Correlation
A correlation is used to determine the relationships between numerical and categorical variables. In other words, it is an indicator of how things are connected to one another. The correlation analysis is the study of how variables are related.
Regression Analysis
Regression analysis is a statistical method in which it estimates the relationship between a dependent variable and one or more independent variable. In simple terms dependent variable is called as outcome variable and independent variable is called as predictors. Regression analysis is one of the methods to find the trends in data. The independent variable used in Regression analysis is named Predictor variable. It offers data of an associated dependent variable regarding a particular outcome.
If there is a first order positive autocorrelation in the error term in the equation and this is due to a specification error,which of the following is the best solution to overcome this problem?
a)If there are variables that should be included in the equation but are not considered,these excluded variables are included or the mathematical form of the equation can be revised
b)Autocorrelation may have occured due to the relationship between two explanatory variables.One or both of these variables must be removed from the equation
c)The equation is estimated by the Maximum Likelihood method after taking the first difference
d)Equation should be estimated by Generalized Least Squares - GLS method
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