Caporale, Guglielmo Maria; Rault, Christophe; Sova, Robert - 2008
)
In the fixed effect transformation, the unobserved effect, α
i
, disappears, which yields
unbiased and consistent … the time-invariant variables that are eliminated by data
transformation;
- the fixed effect estimator ignores … within-transformation and does not need to
meet the orthogonality assumptions (for time-variant variables) of random effects …