In Example 10.6, we estimated a variant on Fair's model for predicting presidential el...

In Example 10.6, we estimated a variant on Fair's model for predicting presidential election outcomes in the United States.

(i) What argument can be made for the error term in this equation being serially uncorrelated? (Hint: How often do presidential elections take place?)

(ii) When the OLS residuals from (10.23) are regressed on the lagged residuals, we obtain = - 068 and se() = .240. What do you conclude about serial correlation in the ut?

(iii) Does the small sample size in this application worry you in testing for serial correlation?