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A Maximum Likelihood Procedure for Regression with Autocorrelated Errors
Charles M. Beach and James G. MacKinnon
Vol. 46, No. 1 (Jan., 1978), pp. 51-58
Published by: The Econometric Society
Stable URL: http://www.jstor.org/stable/1913644
Page Count: 8
You can always find the topics here!Topics: Maximum likelihood estimation, Linear regression, Least squares, Econometrics, Economic research, Agricultural economics, Applied economics, Chicago school of economics, Applied econometrics, Economic analysis
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The widely used Cochrane-Orcutt and Hildreth-Lu procedures for estimating the parameters of a linear regression model with first-order autocorrelation typically ignore the first observation. An alternative maximum likelihood procedure which incorporates the first observation and the stationarity condition of the error process is proposed in this paper. It is similar to the Cochrane-Orcutt procedure, and appears to be at least as computationally efficient. This estimator is superior to the conventional ones on theoretical grounds, and sampling experiments suggest that it may yield substantially better estimates in some circumstances.
Econometrica © 1978 The Econometric Society