The following is a panel of data on investment (y) and profit (x) for n = 3 firms over T = 10 periods. a. Pool the data and compute the least squares regression coefficients of the model yi t = a +...

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The following is a panel of data on investment (y) and profit (x) for n = 3 firms over T = 10 periods.
a. Pool the data and compute the least squares regression coefficients of the model yi t = a + ßxit + eit.
b. Estimate the fixed effects model of (13-2), and then test the hypothesis that the constant term is the same for all three firms.
c. Estimate the random effects model of (13-18), and then carry out the Lagrange multiplier test of the hypothesis that the classical model without the common effect applies.
d. Carry out Hausman’s specification test for the random versus the fixed effect model.

Answered Same Day Dec 24, 2021

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David answered on Dec 24 2021

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The following is a panel of data on investment (y) and profit (x) for n = 3 firms over T = 10 periods. a. Pool the data and compute the least squares regression coefficients of the model yi t = a +...

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