Take the quiz test your understanding of the key concepts covered in the chapter. Try testing yourself before you read the chapter to see where your strengths and weaknesses are, then test yourself again once you’ve read the chapter to see how well you’ve understood.

1. What are panel data?

Data containing units measured at different time points

Data where each unit is measured at more than one time point

Data containing skewed variable distributions

Data measured at one point in time

Answer:

b. Data where each unit is measured at more than one time point

2. What does it mean when we say that our panel is balanced?

When we have more time periods than units

When we have a large sample of units

When we have an equal number of time periods per unit

When we have an unequal number of time periods per unit

Answer:

c. When we have an equal number of time periods per unit

3. Which model takes into account both the time-varying independent variables, the time-invariant independent variables and the unmeasured time-invariant variables?

Pooled OLS

Between effects

Fixed effects

Random effects

Answer:

c. Fixed effects

4. How is the time-invariant independent variables and the unmeasured time-invariant variables captured in a fixed effects model?

By running an ordinary least squares regression.

By running an ordinary least squares regression with robust standard errors.

By taking the mean of each variable for each unit across time, and running a regression on the collapsed dataset of means.

By way of including unit dummy variables.

Answer:

d. By way of including unit dummy variables.

5. What is the name of the statistical test that can help us determine whether to choose a fixed effects or a random effects model?

Hausman test

z-test

chi square test

Link-Wallace test

Answer:

a. Hausman test

6. Random effects is a weighted average between?

Pooled OLS and fixed effects

Pooled OLS and between effects

Between effects and fixed effects

Fixed effects and time fixed effects

Answer:

c. Between effects and fixed effects

7. What characterizes time-series cross-section data?

When we have a large number of units recorded at few time points

When we have a small or medium sized number of units recorded at many time points

When we have a large number of units recorded at many time points

When we have a small or medium sized number of units recorded at few time points

Answer:

b. When we have a small or medium sized number of units recorded at many time points

8. What does non-stationarity mean?

That parameters of our data (such as the mean and variance) do not change over time

That parameters of our data (such as the mean and variance) do change over time

When time series data are not influenced by their historical values

When time series data are influenced by their historical values

Answer:

b. That parameters of our data (such as the mean and variance) do change over time