At 5:01 in the video, it is mentioned that the Autocorrelation of errors is corrected by ADJUSTING THE COEFFICIENTS OF STANDARD ERRORS, I couldn't get this point clearly. Please Explain.
My understanding is - it meant from that sentence as "adjusting the standard errors of coefficients", not ADJUSTING THE COEFFICIENTS OF STANDARD ERRORS. Please correct me if I'm wrong.
Hello Devi Prasad,
Yes, that is correct, it should indeed be standard errors of coefficients. Given, the pattern in the errors ( autocorrelation ) the standard errors of some coefficients or weights are estimated smaller than they actually are. Thereby reducing the range of the estimate of the coefficient. This will lead to false inference that the coefficients are precise. Hence, these standard errors are tweaked to adjust for this shrinking effect cause by autocorrelation using the Hansen method.
We will make this change in video unity. Thanks for pointing out.