Assignment 1

On
Theoretical Concepts of Panel Data
Course: Eco 342a/Eco761a
Instructor : Dr. Somesh K. Mathur
Note: Attempt all the questions. Submission is compulsory for all.
Q 1:Explain the following concepts in detail:
1. Cross-Section Data.
2. Time-Series Data.
3. Pooled versus Panel Data.
4. Hetroscedasticity.
5. Autocorrelation.
6. Multicolinearity.
7. Speciation error.
8. Specification Bias.
9. Unobserved Heterogeneity.
10. Tests of significance (z, t, f and Chi-square).
11. Probability value (p-value).
12. Level of significance.
13. Type-I and Type-II errors.
14. Standard Error.
15. Variance and Covariance.
16. Coefficient of Determination (R2)
17. Adjusted R2.
18. Degrees of Freedom.
Q 2: Explain the assumptions of Classical Linear Regression Model (CLRM). What
happens if these are violated?
1

Q 3: What do you mean by Fixed and Random Effect Models? Compare and contrast in
detail.
Q 4: How do we take care of the omitted/time invariants variables in the fixed effect
model? Specify the alternative estimation technique(s), if these exist.
Q 5: Interpret the following Fixed Effect estimation results:

1. Coefficients interpretation;
2. Standard errors;
3. Overall significance;
4. Confidence interval;
5. R2 within and Between;

Q 6: Interpret the following Random Effect estimation results:

1. Coefficients interpretation;
2. Standard errors;
3. Overall significance;
4. Confidence interval;
5. R2 within and Between;
6. Sigma u, Sigma e and Rho;
7. How the estimated results differ from the fixed effect estimation results?
Q 7: How do we choose between random vs. fixed effects in panel data estimation? (Hint:
Explain Haussmann test).
Q 8:What do you mean by Unit Root Problem in Panel data Analysis? How it can be tested
and also explain the measures to control it?
Q 9: When do we apply GMM estimation? How it differs from the Instrumental Variable
Estimation?
***********