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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