With Panel Data, regression software typically uses an "entity-demeaned" algorithm because
A)the OLS formula for the slope in the linear regression model contains deviations from means already.
B)there are typically too many time periods for the regression package too handle.
C)the number of estimates to calculate can become extremely large when there are a large number of entities.
D)deviations from means sum up to zero.

Question

Quizplus · Accepted Answer

The "entity-demeaned" algorithm is used to handle the large number of estimates that arise when there are many entities, as it simplifies the computation by removing entity-specific effects.

With Panel Data, Regression Software Typically Uses an "Entity-Demeaned" Algorithm