ABSTRACT
Whenever there is a time element in the regression analysis, there is a real
danger of the dependent variable correlating with itself. In the literature of
statistics, this phenomenon is termed autocorrelation or serial correlation; in
this text, we use the latter as descriptive of a situation in which the value, yi, is dependent on yi1, which, in turn, is dependent on yi2. From a statistical perspective, this is problematic because the error term, ei, is not independent-a requirement of the linear regression model. This interferes with
least-squares calculation.
