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THE EFFICIENCY OF THE COCHRANE‐ORCUTT PROCEDURE
Author(s) -
Hoque Asraul
Publication year - 1989
Publication title -
australian journal of statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.434
H-Index - 41
eISSN - 1467-842X
pISSN - 0004-9581
DOI - 10.1111/j.1467-842x.1989.tb00983.x
Subject(s) - ordinary least squares , estimator , autocorrelation , statistics , econometrics , mathematics , minimum variance unbiased estimator , efficient estimator , efficiency , variables
Summary It is well known that the ordinary least squares (OLS) estimator, though unbiased, is inefficient in the presence of autocorrelated disturbances. Further, it is also widely accepted that the Cochrane‐Orcutt (C‐O) estimator is more efficient than the OLS estimator. However, Kadiyala (1968) and Maeshiro (1976, 1978) have argued that OLS is more efficient than C‐O when the independent variable is trended and the autocorrelation coefficient is positive. We re‐examine this issue and show that C‐O is more efficient than OLS for the model without an intercept term.