A Small-Sample Correction for Testing for gth-Order Serial Correlation with Artificial Regressions.

Monte Carlo experiments establish that the usual 't-statistic' used for testing for first-order dial correlation with artificial regressions is far from being distributed as a Student's t in small samples. Rather, it is badly biased in both mean and variance and results in grossly misleading tests of hypotheses when treated as a Student's t. (Similar distortions plague the familiar Durbin-Watson statistic.) Simply computed corrections for the mean and variance are derived, however, which are shown to lead to a transformed statistic producing acceptable tests. The test procedure is detailed and exemplar code provided. Citation Copyright 1997 by Kluwer Academic Publishers.