THE EFFICIENCY OF THE COCHRANE-ORCUTT PROCEDURE |
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Authors: | Asraul Hoque |
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Affiliation: | Department of Econometrics, Monash University Clayton, Victoria, Australia |
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Abstract: | 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. |
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