True or false

1. In case of panel data, We are observing different cross sections

(individuals, firms or countries) at different times, then we will have
total observation units of N x T (T)
2. In pooled OLS regression panel data model, the model assumes
homogeneity of all sections of data in a panel data study that it is does
not treat each section differently (T)

3. In pooled OLS regression model, it treats all section as just a single

section of data. (T)

4. If panel data is collected for six countries across 1980-1990, Fixed

effect model does not distinguish between these six countries while
also neglecting the cross section and time series nature of the data.
(F)
5. Pooled OLS model allows for heterogeneity or individuality among
different cross-sections allowing each cross-section to have its own
intercept (F)

6. In random effect model , the intercept may be different for the

crosssections but it is time invariant that is the intercept remains the
same over time (F)

7. Random effect model allows for heterogeneity and the individual

specific effect must be uncorrelated with the independent variables.
(T)
8. To determine the right model between the fixed and random effects
model, we use the Hausman test (T)

9. To determine the right model between the random effect model and
the Pooled OLS regression model, the Lagrange Multiplier Lagrange
multiplier test is adopted.

10. shows the regression equation of

pooled OLS model Where N = number of individuals or cross section
and T = the number of time periods. (F)
11. Fixed effects assume that differences between individuals (cross
section) can be accommodated from different intercept (T)
12. The term balanced panel data means the amount of time (year)
available for each panel (state) is the same or constant. (T)
13. shows the regression equation of pooled
OLS model. Where N = number of individuals or cross section and T
= the number of time periods. (T)
14. In the Random Effect model, the difference between cross sections is
accommodated by the error terms of each company. (T)

15. shows the regression equation of

pooled OLS model Where N = number of individuals or cross section
and T = the number of time periods. (F)
16. In the previous equation,εit is the residual as a whole where the
residual is a combination of cross section and time series. ui is an
individual residual which is a random characteristic of the i-th unit
observation and remains at all times. (T)