Can be positive or negative (+ive S.C. is more common)
- What is it? Residuals are correlated
- What it does? Too many Type I errors (too many type II errors for -ive S.C.)
- How to detect? Durbin Watson Test = 2(1-r)
- How to Fix: Use Hansen method to adjust standard errors
If C.H. and +ive S.C. are present
together, use Hansen method to adjust standard errors