Is it right that with positive autocorrelation in the errors, the model underestimates the SE? Hence, using generalized differencing (such as Cochrane-Orcutt), the transformed model has a higher value of SE? And if so, what happens to a model with negative autocorrelation? I can't quite explain how these happen.

  • $\begingroup$ Could you provide more details? E.g. autocorrelation in what: dependent variable, independent variables, errors? Also, what do you mean by generalized differencing? $\endgroup$ May 16 at 16:43
  • $\begingroup$ Autocorrelation in errors and generalized differencing such as Cochrane-Orcutt $\endgroup$
    – Mark Lee
    May 17 at 1:10


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