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Wed 15 Aug, 2012 12:27 pm
I have a set of 76 annual occurrences of x and y. When I run a linear regression, y is significantly correlated to x. The Durbin-Watson test shows y is also serially correlated.
My goal is to predict y from a certain future x and to determine the prediction interval.
I believe the proper point estimate equation is: Yt = (Xt*B) + (p*Yt-1) – (p*Xt-1*B) + Vt. Is this correct?
Xt, Yt-1, and Xt-1 are known. What are B, p, and Vt and how can I calculate them for a particular Yt prediction?
How do I calculate the prediction interval for Yt?
If not too complex, how does equation change if serial correlation is second order?