Beyond Moran’sI: Testing for Spatial Dependence Based on the Spatial Autoregressive Model

The statistic known as Moran’s I is widely used to test for the presence of spatial dependence in observations taken on a lattice. Under the null hypothesis that the data are independent and identically distributed normal random variates, the distribution of Moran’s I is known, and hypothesis tests based on this statistic have been shown in the literature to have various optimality properties. Given its simplicity, Moran’s I is also frequently used outside of the formal hypothesis‐testing setting in exploratory analyses of spatially referenced data; however, its limitations are not very well understood. To illustrate these limitations, we show that, for data generated according to the spatial autoregressive (SAR) model, Moran’s I is only a good estimator of the SAR model’s spatial‐dependence parameter when the parameter is close to 0. In this research, we develop an alternativeclosed‐formmeasure of spatial autocorrelation, which we callAPLE, because it is an approximate profile‐likelihood estimator (APLE) of the SAR model’s spatial‐dependence parameter. We show thatAPLEcan be used as a test statistic for, and an estimator of, the strength of spatial autocorrelation. We include both theoretical and simulation‐based motivations (including comparison with the maximum‐likelihood estimator), for usingAPLEas an estimator. In conjunction, we propose theAPLEscatterplot, an exploratory graphical tool that is analogous to the Moran scatterplot, and we demonstrate that theAPLEscatterplot is a better visual tool for assessing the strength of spatial autocorrelation in the data than the Moran scatterplot. In addition, Monte Carlo tests based on bothAPLEand Moran’s I are introduced and compared. Finally, we include an analysis of the well‐known Mercer and Hall wheat‐yield data to illustrate the difference betweenAPLEand Moran’s I when they are used in exploratory spatial data analysis.