Finance Research | Panel Data Analysis | How to select model for panel data research?

When selecting a panel data model for finance research, consider the data structure, research objectives, and theoretical underpinnings. Start by testing for individual heterogeneity using the Hausman test to decide between fixed effects (FE) or random effects (RE) models. Use FE when unobserved heterogeneity correlates with independent variables, ensuring robust results. If no correlation exists, RE is efficient.

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