multicollinearity concerns panel data across section or with

[startz]

I misunderstood. Using a lagged dependent variable may be okay, but how do you know that it eliminates serial correlation?

[Wouter van der Stee]

Durbin Watson, or is that not a valid test if a lagged independent variable in included on teh right hand side? If so, is Durbin Watson a valid test for ar(1) included?

[startz]

Durbin-Watson is not a valid test in this circumstance. Use the Breusch-Godfrey test under View/Residual Diagnostics/Serial Correlation and set to 1 lag

[Wouter van der Stee]

That's not possible when running a GARCH(1,1) model. I use Eviews 7. The only test available is the ARCH LM test under this window...

[startz]

That's not possible when running a GARCH(1,1) model. I use Eviews 7. The only test available is the ARCH LM test under this window...

I'm not sure what to suggest as a work around, as the DW can be wildly off in this circumstance. My guess is that you should stick with using AR(1).

[Wouter van der Stee]

Startz,

Thank you very much for your time! Helped me a lot.

Wouter