# Durbin Watson Statistic

﻿
Durbin Watson Statistic
A number that tests for autocorrelation in the residuals from a statistical regression analysis. The Durbin-Watson statistic is always between 0 and 4. A value of 2 means that there is no autocorrelation in the sample. Values approaching 0 indicate positive autocorrelation and values toward 4 indicate negative autocorrelation.

Autocorrelation can be a significant problem in analyzing historical pricing information if one does not know to look out for it. For instance, since stock prices tend not to change too radically from one day to another, the prices from one day to the next could potentailly be highly correlated, even though there is little useful information in this observation. In order to avoid autocorrelation issues, the easiest solution in finance is to simply convert a series of historical prices into a series of percentage-price changes from day to day.

Investment dictionary. . 2012.

### Look at other dictionaries:

• Durbin–Watson statistic — In statistics, the Durbin–Watson statistic is a test statistic used to detect the presence of autocorrelation (a relationship between values separated from each other by a given time lag) in the residuals (prediction errors) from a regression… …   Wikipedia

• James Durbin — Infobox Scientist image width = 150px name = James Durbin box width = birth date = 1923 birth place = death date = death place = residence = United Kingdom citizenship = United Kingdom field = statistics, econometrics work institutions = London… …   Wikipedia

• Geoffrey Watson — Geoffrey Stuart Watson (3 December 1921 – 3 January 1998) was an Australian statistician.Watson was born in Bendigo, Victoria in 1921. He studied at the University of Melbourne, and received his PhD at the North Carolina State University in 1951 …   Wikipedia

• Breusch–Godfrey test — In statistics, the Breusch Godfrey serial correlation LM test is a robust test for autocorrelation in the residuals from a regression analysis and is considered more general than the standard Durbin–Watson statistic (or Durbin s h… …   Wikipedia

• List of statistics topics — Please add any Wikipedia articles related to statistics that are not already on this list.The Related changes link in the margin of this page (below search) leads to a list of the most recent changes to the articles listed below. To see the most… …   Wikipedia

• Ordinary least squares — This article is about the statistical properties of unweighted linear regression analysis. For more general regression analysis, see regression analysis. For linear regression on a single variable, see simple linear regression. For the… …   Wikipedia

• John von Neumann — Von Neumann redirects here. For other uses, see Von Neumann (disambiguation). The native form of this personal name is Neumann János. This article uses the Western name order. John von Neumann …   Wikipedia

• Autocorrelation — is a mathematical tool for finding repeating patterns, such as the presence of a periodic signal which has been buried under noise, or identifying the missing fundamental frequency in a signal implied by its harmonic frequencies. It is used… …   Wikipedia

• List of mathematics articles (D) — NOTOC D D distribution D module D D Agostino s K squared test D Alembert Euler condition D Alembert operator D Alembert s formula D Alembert s paradox D Alembert s principle Dagger category Dagger compact category Dagger symmetric monoidal… …   Wikipedia

• Анатольев — Анатольев, Станислав Анатольевич Станислав Анатольевич Анатольев Дата рождения: 19 сентября Гражданство:  Российская Федерация Научная сфера …   Википедия

### Share the article and excerpts

##### Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.