TOPIC 5: PANEL DATA MODELS-RANDOM EFFECTS

1. 1. Random effects model assumes that the unobserved heterogeneity factor is present and __________ with the regressors.

2. 2. Random effects model transforms the observations in panel data by removing a _______ of the time-average value from the original observations.

4. 4. If theta value equals to 1, Random effects model is equivalent to ________ model.

5. 5. If theta value equals to 0, Random effects model is equivalent to Fixed effects model.

• TRUE

• FALSE