Handling AutoCorrelation in Fixed Effect Model
Posted: Tue Aug 23, 2016 12:39 am
Hi,
Is there any available reference regarding use of AR(1) term or its restriction in Fixed Effect model? In my recent study I used AR(1) term in FE model to control Durbin Watson value for autocorrelation problem. By inclusion of AR(1) term the D.W value has been improved from 0.96 to 1.97, but I am now questioned that if it is valid inclusion and would not bias the estimate?
Any idea, help please.
Is there any available reference regarding use of AR(1) term or its restriction in Fixed Effect model? In my recent study I used AR(1) term in FE model to control Durbin Watson value for autocorrelation problem. By inclusion of AR(1) term the D.W value has been improved from 0.96 to 1.97, but I am now questioned that if it is valid inclusion and would not bias the estimate?
Any idea, help please.