Hildreth - Lu procedure

The Hildreth - Lu procedure corrects for serial correlation (autocorrelation) in regression type data.

Download the Macro

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Important

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Download HILD_LU.mac

Required Inputs

A column of dependent values
One or more columns of independent values

Optional Inputs

RHO C: The default values of rho, the correlation coefficient, are -.9, -.8, -.7, -.6, -.5, -.4, -.3, -.2, -.1, 0, .1, .2, .3, .4, .5, .6, .7, .8, and .9. If you want to use different values for rho, store your values in a column. Use this command to specify the column containing the rho values you want to use.

Running the Macro

Suppose your dependent variable is in C1 and your independent variables are in C2 and C3. To run the macro choose View > Command Line/History and type:

%HILD_LU C1 C2 C3.

Click Run.

More Information

Each value of rho is used in a general differencing transformation of the data. (The first observation is transformed into a missing value). Each set of transformed data is used in a regression and the sum of squares of the residual error (SSE) is recorded. The value of rho that produced the smallest SSE is printed and used to produce the final regression output using the transformed data.

Reference

"Econometric Models & Economic Forecasts" by Robert S. Pindyck and Daniel L. Rubinfeld, Second Edition, McGraw Hill.