Estimating the correlation in network disturbance models
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The Network Disturbance Model of Doreian (1989) expresses the dependency between observations taken at the vertices of a network by modelling the local autocorrelation, using a single correlation parameter ρ. It has been observed that estimation of ρ in dense graphs, using the method of Maximum Likelihood, leads to results that can be both biased and very unstable. In this paper, we sketch why this is the case, showing that the variability cannot be avoided, no matter how large the network. We also propose a more intuitive estimator of ρ, which shows little bias.
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