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I Panel study, multiple linear regression, assumptions

  1. Mar 20, 2017 #1
    Hey.

    I am doing a project where I am studying a set of companies over a 7-year period. I am doing a multiple linear regression analysis either with fixed or random effects (so, it's a panel study). What I am wondering is if the general assumptions/requirements apply when using the fixed/random effects technique, so that I should test for them to ensure they are fulfilled?

    The assumptions I am referring to are:

    - The variables are normally distributed
    - The relation between the independent variables and the dependent variables are linear
    - homoscedasticity
    - independent and normally distributed residuals

    (I plan to use a Hausman's test to decide on whether to use the fixed or random effects model)

    Thanks in advance
    Mons
     
  2. jcsd
  3. Mar 23, 2017 #2

    MarneMath

    User Avatar
    Education Advisor

    Yes and you should also test for correlation since you have a time index in your model. (While that may be assumed by iid portion I find that not many people actually test for it).
     
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