Autocorrelation Problem Set Refer to the attached “stocks” data

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?