Efficiency of OLS Relative to C-O for Trended X and Positive Autocorrelation Coefficient

Asraul Hoque

No 266884, Department of Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: It is well known that the OLS estimator, though unbiased, is inefficient in the presence of autocorrelated disturbances. Further, it is also widely accepted that C-0 (Cochrane-Orcutt) estimator is more efficient than OLS estimator. However, Kadiyala (1968) and Maeshiro (1976, 1978) have argued that OLS is more efficient than C-0 when the independent variable is trended and the autocorrelat ion coefficient is positive. We re-examine this issue and show that C-0 is more efficient than OLS for the model without an intercept term.

Keywords: Productivity; Analysis (search for similar items in EconPapers)
Pages: 18
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Persistent link: https://EconPapers.repec.org/RePEc:ags:monebs:266884

DOI: 10.22004/ag.econ.266884

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