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

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.


Issue Date:
Jul 01 1988
Publication Type:
Working or Discussion Paper
Record Identifier:
http://ageconsearch.umn.edu/record/266884
Language:
English
Total Pages:
18
Series Statement:
Working Paper No. 11/88




 Record created 2018-01-22, last modified 2018-01-23

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