Javanese5987
Javanese5987
25.07.2020 • 
Mathematics

Assume that Assumptions TS.1, TS.2, TS.3, and TS.4 all hold. (i) Suppose we think that the errors 5ut6 follow an AR(1) model with parameter r and so we apply the Prais-Winsten method. If the errors do not follow an AR(1) model—for example, suppose they follow an AR(2) model, or an MA(1) model—why will the usual Prais-Winsten standard errors be incorrect?

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