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Journal Article

A Maximum Likelihood Procedure for Regression with Autocorrelated Errors

Charles M. Beach and James G. MacKinnon
Econometrica
Vol. 46, No. 1 (Jan., 1978), pp. 51-58
Published by: The Econometric Society
DOI: 10.2307/1913644
Stable URL: http://www.jstor.org/stable/1913644
Page Count: 8
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
A Maximum Likelihood Procedure for Regression with Autocorrelated Errors
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Abstract

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.

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