Which of the Following Is a Difference Between a Fixed

question 21

Multiple Choice

Which of the following is a difference between a fixed effects estimator and a first-difference estimator?

• A)The fixed effects estimators are always larger than the first difference estimators in a two-period panel data analysis.
• B)The fixed effects estimator is more efficient than the first-difference estimator when the idiosyncratic errors are serially uncorrelated.
• C)The first difference estimator is more sensitive to nonnormality and heteroskedasticity.
• D)The bias in the first difference estimator depends on the time period (T) of analysis while the bias in the fixed effect does not depend on T.

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Definitions:

Indirect Expense

refers to expenses that are not directly associated with the production of goods or services, such as utility costs, rent, and administration salaries.

Gross Profit

The difference between revenue and the cost of goods sold, representing the basic profitability of a company's products or services.

Sports Apparel

Clothing and accessories designed for sports and physical activities.

Depreciation

The allocation (spreading) of the cost of an asset (such as an auto or equipment) over its expected useful life.