The DurbinWatson Statistic, and Practice with MarketModel Regressions

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The Durbin-Watson Statistic, and Practice with
Market-Model Regressions

• International Finance
• Dick Sweeney

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Meaning of Durbin-Watson Statistic
Dependent Variable APRG1 Included observations
1756 Variable Coefficient Std.
Error t-Statistic Prob.   C 0.000368 0.000176
2.090633 0.0367 EX -0.025575 0.017384 -1.471172 0.
1414 R-squared 0.001232 Durbin-Watson stat
1.888259
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Meaning of D-W Statistic (cont.)
Dependent Variable RES Included observations
1755 Variable Coefficient Std.
Error t-Statistic Prob.   C -1.57E-06 0.000176 -0
.008960 0.9929 RES(-1) 0.055831 0.023846 2.341303
0.0193 R-squared 0.003117 Durbin-Watson
stat 1.996832
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Meaning of D-W Statistic (cont.)

• Dependent Variable APR
• Included observations 1755
• Variable Coefficient Std. Error t-Statistic Prob. 
  
• C 0.000346 0.000176 1.965313 0.0495
• EX -0.025343 0.017367 -1.459323 0.1447
• APR(-1) 0.056387 0.023837 2.365468 0.0181
• R-squared 0.004405  Durbin-Watson stat
  1.99792

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Practice-Set 2

• Dependent Variable APRG1
• Sample 1 875
• Variable Coefficient Std. Error t-Statistic Prob. 
   
• C 0.000553 0.000256 2.159584 0.0311
• EX -0.056822 0.021482 -2.645100 0.0083
• R-squared 0.007951 Durbin-Watson stat
  1.888225     

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Practice-Set 2 (cont.)

• Dependent Variable APRG1
• Sample 876 1756
• Variable Coefficient Std. Error t-Statistic Prob. 
   
• C 0.000174 0.000240 0.726326 0.4678
• EX 0.044551 0.030327 1.469020 0.1422
• R-squared 0.002449 Durbin-Watson stat
  1.890381

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Practice-Set 2 (cont.)

• Dependent Variable APRG1
• Sample 1 500
• Variable Coefficient Std. Error t-Statistic Prob. 
   
• C 0.000867 0.000371 2.339593 0.0197
• EX 0.074807 0.052134 1.434892 0.1519
• R-squared 0.004117 Durbin-Watson stat
  1.872122

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Practice-Set 2 (cont.)

• Dependent Variable APRG1
• Sample 501 1000
• Variable Coefficient Std. Error t-Statistic Prob. 
   
• C 5.57E-05 0.000288 0.193500 0.8466
• EX -0.090112 0.019908 -4.526530 0.0000
• R-squared 0.039518 Durbin-Watson stat
  1.985478

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Practice-Set 2 (cont.)

• Dependent Variable APRG1
• Sample 1001 1500
• Variable Coefficient Std. Error t-Statistic Prob. 
   
• C 0.000256 0.000284 0.901596 0.3677
• EX -0.034768 0.034790 -0.999349 0.3181
• R-squared 0.002001 Durbin-Watson stat
  1.959965