Question
In relation to Panel Data Models, which of the following statements are correct? (Select all correct statements. A penalty applies to each incorrect answer.) Select
In relation to Panel Data Models, which of the following statements are correct? (Select all correct statements. A penalty applies to each incorrect answer.)
Select one or more: 1. A panel data model which is described as being Long and Narrow has a relatively small number of cross-sectional units observed over a relatively large number of time periods.
2. In a panel data regression model, explanatory variables can help explain individual heterogeneity. These explanatory variables cannot also vary across time.
3. The Fixed Effects and Random Effects models will always generate the same coefficients estimates but the Random Effects estimator will be more efficient.
4. The Within Estimator can be used to estimate the coefficients of both time-varying and time-invariant explanatory factors.
5. If there is correlation between observations in different time periods for the same individual then the least squares standard errors will overstate the reliability of pooled OLS estimates.
6. The Random Effects estimator is effectively a pooled OLS estimator applied to a transformed model of the data.
7. Given the regression equation: yit = 1 + 2xit + ui + eit where ui represents unobserved individual heterogeneity and eit represents an idiosyncratic error which can vary over time and across individuals, if u2 = 0 then the Random Effects model could be appropriate.
8. The Fixed Effects model can be used to estimate the parameters of the following regression equation: yit = 1 + 2xit + 3wi + ui + eit where ui represents unobserved individual heterogeneity and eit represents an idiosyncratic error which can vary over time and across individuals, and xit and wi are explanatory variables.
9. A Panel Data model allows us to control for the omitted variable bias that would otherwise be caused by omitted variables which do not vary over time.
10. The Least Squares Dummy Variable Estimator and the Within Estimator are both estimators which can be used in a Fixed Effects regression model.
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