What are the implications of autocorrelation in the residuals of a regression model?
- It causes bias in the parameter estimates
- It indicates that the model is overfit
- It suggests that the model is underfit
- It violates the assumption of independent residuals
Autocorrelation in the residuals of a regression model violates the assumption of independent residuals. This can lead to inefficient estimates and incorrect standard errors, leading to unreliable hypothesis tests and confidence intervals.
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