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Author: jj307 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 252144  
Subject: Re: Durbin Watson Statistic Date: 7/22/2008 7:40 PM
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Hi Mike,
I don't think anyone else here will be interested but autocorrelation is just the correlation between two consecutive points in time in a series of one variable (like correlation is the correlation between 2 different variables at the same time).

DW is a measure of lag 1 positive autocorrelation and a value<2 should be significant.

When you do a regression the error terms are supposed to be independent. In a time series with autocorrelation this assumption is violated. If you are doing this for something like a thesis or for a large project at your job I would have somebody who knows how to do forecasting work on it.

If you are doing a short range prediction for not a ton of money and you aren't worried about things like seasonality, risk management, or CIs, I probably would not worry about the autocorrelation. -Jeff
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