Midterm 2

Question 1

What’s the process of answering this question, “Do you think there is serial correlation in the residuals? Why or why not?”

Answer 1

Look at the t-stat for Ljung-Box Test and if it is greater than .05, we fail to reject the null hypothesis that there is no serial correlation

Question 2

What’s the process of answering this question, “Do you think the residuals of this model approximately follow a normal distribution?
Why or why not?”

Answer 2

Look at the Jarque-Bera t-stat and if its less than 0.05 than we reject the null hypothesis that the residuals follow a normal distribution