Figure 4.1 Positive Autocorrelation Negative autocorrelation means that the correlation between successive values of the disturbance term is negative. A positive value in one observation is more likely to be followed by a negative value than a positive value in the next, and vice versa this is shown by an illustrative scatter diagram in Figure 4.2. Aline joining successive observations to one another would cross the line relating Y to X with greater frequency than one would expect if the values of the disturbance term were independent of each other. Economic examples of negative autocorrelation are relatively uncommon, but sometimes it is induced by manipulations used to transform the original specification of a model into a form suitable for regression analysis.
