Hi, I have looked online and seen different versions of how to use ACF and PACF. I am running the following regression:
if I want to find visually the number of lags I should use for CSAD in my regression to alleviate autocorrelation which method is the appropiate one?

method 1:

And from here look and decide the number of lags

method 2:

And from here decide how many lags of CSAD i should use.

my intuition are that the two are the same, and running method one will simply show with what lags of itself CSAD is correlated, whereas running method 2 will show to how many lags will the error term be correlated with past values, meaning that the error term includes some variables correlated with CSAD, more specifically its lags that are given in method 2.

could someone please tell me if I am right or which method I should use.

thank you

Code:

reg CSAD X1 X2 X3

method 1:

Code:

ac CSAD pac CSAD

method 2:

Code:

reg CSAD X1 X2 X3 predict residual, r ac residual pac residual

my intuition are that the two are the same, and running method one will simply show with what lags of itself CSAD is correlated, whereas running method 2 will show to how many lags will the error term be correlated with past values, meaning that the error term includes some variables correlated with CSAD, more specifically its lags that are given in method 2.

could someone please tell me if I am right or which method I should use.

thank you

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