Estimating Serial Correlation by Visual Inspection of Diagnostic Plots

By counting the .peaks. (relative maxima) of a time series, it is possible to estimate the serial correlation in the series, under the assumption that the series is a first-order autoregressive process.The estimator is inefficient, but it is effective nonetheless, and since all computations can be performed mentally and no tables are required, it is suitable for the quick assessment of computer-generated diagnostic plots.It also enjoys certain robustness properties.As a test for serial correlation, the procedure is essentially the same as one proposed by Bienaymé in 1874 and by Wallis and Moore in 1941, which is itself equivalent to tests based on the counts of runs up and down.