A researcher wishes to test for first order serial correlation in the residuals from a linear regression. The DW test statistic value is 0.86.

There are eighty quarterly observations in the regression, which is of the form

(5.15)

The relevant critical values for the test (see Table A2.6 in the appendix of statistical distributions at the end of this book), are dL = 1.42, dU =

1.57, so 4 − dU = 2.43 and 4 − dL = 2.58. The test statistic is clearly lower than the lower critical value and hence the null hypothesis of no autocorrelation is rejected and it would be concluded that the residuals from the model appear to be positively autocorrelated.