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Autocorrelation Problem Set Refer to the attached “stocks” data

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Autocorrelation Problem Set

Refer to the attached “stocks” data.  Data include NYSE index values, GDP measured in billions of dollars, and time from 1980-2006.  First, estimate the following equation using Ordinary Least Squares (OLS):

NYSEt=B1+B2GDPt+ut

1. Use a scatter diagram to assess whether there is first-order autocorrelation in this series? 
2. Now, assess whether there is first-order autocorrelation based on the basis of the d test.  Note: use the command “tsset time” so that you can estimate the Durbin-Watson statistic using “estat dwatson.”
3. Finally, correct the problem of autocorrelation using the “Newey-West” method.
4. (Optional) Use the d value from (b) to transform the data per the generalized difference equation below:

Yt-ρYt-1=B11-ρ+B2Xt-ρXt-1+vt

Is there autocorrelation in the transformed model?