Statistics

Refer to the attached “stocks” data. Data include NYSE index values, GDP measured in billions of dollars, and time from 1980-2006. First, estimate the following equation using Ordinary Least Squares (OLS):

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Visually explore the data for potential violations of OLS assumptions. Assess whether there is first-order autocorrelation based on the Durbin-Watson test. Correct the problem of autocorrelation using the “Newey-West” method. Use your predicted d-value to transform the data to solve the problem of autocorrelation.

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