Investment and Tobin's \(q\). Schaller (1990) uses data based on financial statements of 188 large publicly traded US firms, over the period 1951-1985, to estimate an investment equation based on Tobin's q. The dependent variable is the ratio of investment to the capital stock \((\mathrm{I} / \mathrm{K})\). \(\mathrm{q}\) is the ratio of the market value of the firm to the replacement cost of its assets. The data are available from the Journal of Applied Econometrics data archives.

(a) Replicate the descriptive statistics given in Table I of Schaller (1990, p. 313).

(b) Replicate the OLS, FE, and RE regressions for both the broad and narrow definitions of capital given in Tables II and III of Schaller (1990, p. 313).

(c) Perform the Hausman test for FE versus RE for Tables II and III.