- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 5. Multiple Regression
- Subject 12. The Durbin-Watson Statistic

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**CFA Practice Question**

If the Durbin-Watson statistic is less than dL, we should:

A. fail to reject the null hypothesis of no positive serial correlation.

B. reject the null hypothesis of no positive serial correlation.

C. fail to reject the null hypothesis of positive serial correlation.

**Explanation:**If the Durbin-Watson statistic is less than d

_{L}, the analyst should reject the null hypothesis that there is no positive serial correlation.

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**User Contributed Comments**
5

User |
Comment |
---|---|

danlan2 |
Durbin-Watson statistic for independant variable correlation. |

danlan2 |
D-W statistic is 2(1-r), if it is less than dL, r is large and we accept the positive serail correlation assumption |

richmondo |
Tricky |

chriswwu |
Sorry, richmondo. It is not tricky. It is the most basic application of Durbin-Watson... exactly like what they said in the explanation. |

Rm178234 |
Why isn't C also correct? If we were running the null hypothesis of positive serial correlation, wouldn't we fail to reject it? |