The Fixed Effects regression model
A)has n different intercepts.
B)the slope coefficients are allowed to differ across entities, but the intercept is "fixed" (remains unchanged).
C)has "fixed" (repaired)the effect of heteroskedasticity.
D)in a log-log model may include logs of the binary variables, which control for the fixed effects.

Question

Quizplus · Accepted Answer

DA) Fixed Effects regression models include individual intercepts for each entity (e.g., person, company, country) in the panel data, allowing for the control of unobserved heterogeneity that does not vary over time.D) In a log-log model, taking logs of binary variables is not meaningful for controlling fixed effects. However, the statement is partially correct in the sense that fixed effects models can include log-transformed variables (not specifically binary) to control for fixed effects, but the inclusion of logs of binary variables is not a standard approach for controlling fixed effects. The correct interpretation of D should be that fixed effects models can include log-transformed variables, but the mention of binary variables is misleading.

The Fixed Effects Regression Model