To examine a given time series for signs of serial correlation, we conduct a statistical test for white noise (Ljung-Box Test):

$$H_{o}: \rho_{1}=\rho_{2}=...=\rho_{m}=0 $$

$$H_{1}: \exists \rho_{k}\neq 0$$

Where $\rho_i$ is the autocorrelation function for the i-th lag. The selection of $m$ (max. lags) is rather arbitrary, but experience shows that we achieve the best results with $m=\left \lceil \ln(N) \right \rceil$ as the input sample size.

NumXL provides an intuitive interface to help Excel users conduct a white noise test using several lag-orders. In this tutorial, we’ll demonstrate the steps to perform a thorough white noise test using NumXL functions and wizards in Excel.

## Process

- Select an empty cell to store the histogram table.

- Locate the Statistical Test (STAT TEST) icon in the toolbar (or menu in Excel 2003) and click on the down-arrow. When the drop-down menu appears, select the “White Noise Test”.

- The white noise dialog box appears.
- Select the cells range for the input data.

- Click the “Options” Tab. Select the maximum lag order in the test (i.e. m).

- If your data include one or more intermediate observations with missing values, click the “Missing Values” tab.

- Click “OK”.
- The white noise wizard generates white noise statistics for different lags scenarios.

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