INTRODUCTION TO PANEL DATA ANALYSIS FARIDAH NAJUNA MISMAN, PhD

FINANCE DEPARTMENT

USING EVIEWS FACULTY OF BUSINESS & MANAGEMENT

UiTM JOHOR

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OUTLINE
1. Introduction
2. CLRM Assumptions
3. Static Panel Data Models
4. Getting Start with EViews 9
5. Data Analysis
6. Reading The Results

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1. INTRODUCTION
There are 3 types of data structure available:
1. Time Series data is data that is collected at regular time intervals such as every
month or every year. (N=1, t=1……T)
• Usually this represents the values for a single firm or a single variable at different points in time.
• Most macroeconomic data for real variables e.g. GDP or Consumption, is quarterly time series data.
• The data for monetary variables such as Interest rates is often monthly time series data.

2. Cross sectional data is data associated with the values of many different firms or
households that is collected at a single point in time. (i=1……N, T=1)
3. Panel data is a combination of the other two where we have values for all
members of a panel or group of firms or households measured at more than one
period in time. (i=1…..N, t=1……T)

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1. INTRODUCTION
 Classical panel data: N>T or known as short or micro panel
 Macro panel: T>N or known as long panel
 Balanced panel : data available for all cross section for all periods.
No of observation: n = NT
 Unbalanced panel : different T for individual. (notes: Eviews cannot read
unbalanced panel)

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1. INTRODUCTION
 Selection of econometric models will depend o type of data:
1. Least Squares Regression: Normally applied to cross-section data set (e.g
Ordinary Least Squares , OLS)
2. Time-series Model: Normally applied to time series data, to uncover long run
relations and short run dynamics.
3. Panel Data Modelling: Normally used to capture heterogeneity across samples
and due to the need to have bigger sample size.
❖ Statics
Panel data model : POLS, FE, RE, BE
❖Dynamic panel data: GMM
❖Panel unit root and cointegration (macro panel)

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1. INTRODUCTION
Advantages & Disadvantages
 Panel Data allow us to control for variables you cannot observe or measure such as:
❖ Time-invariant factors like geographical area, firm management characteristics.
❖ Variables that change over time but not across entities like national policies, federal regulation, international
agreements.

 In other word, panel data is able to take into account for individual
heterogeneity (uniqueness)- resulted efficient estimates

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1. INTRODUCTION
Advantages:
i. Larger sample size, more variation, less collinearity therefore it will increased
precision of estimates
ii. Ability to study the dynamic- repeated cross-sectional observations-adjustment
over times
iii. Ability to account for heterogeneity across individual often ignored in pooled
data-more robust against misspecification due to omitted variable
Disadvantages:
i. Data availibity/maintenance
ii. Measurement errors
iii. Elf-selection bias

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1. INTRODUCTION
Why Analyse Panel Data?
We are interested in describing change over time o social change, e.g.
changing attitudes, behaviours, social relationships o individual growth or
development, e.g. life-course studies, child development, career trajectories,
school achievement o occurrence (or non-occurrence) of events
We want superior estimates trends in social phenomena o Panel models can
be used to inform policy – e.g. health, obesity o Multiple observations on
each unit can provide superior estimates as compared to cross-sectional
models of association
We want to estimate causal models o Policy evaluation o Estimation of
treatment effects
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1. INTRODUCTION
What kind of data are required for panel analysis?
Basic panel methods require at least two “waves” of measurement. Consider student
GPAs and job hours during two semesters of college
One way to organize the panel data is to create a single record for each
combination of unit and time period
Notice that the data include:
 A time-invariant unique identifier for each unit (StudentID)
 A time-varying outcome (GPA)
 An indicator for time (Semester)

Panel datasets can include other time-varying or time-invariant variables

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2.CLASSICAL LINEAR REGRESSION MODEL (CLRM)

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Table taken from page 37, “Applied Econometrics:, Asteriou & Hall, 2nd ed. 2011, Palgrave Macmillan
3. PANEL DATA MODEL: POOLED OLS
 Pooled OLS
yit = β0 + βit Xit + αi + νit

i. αi and vit are normally distributed and they are mutually independent,

ii. E(αi) = E(vij) = 0, for i = 1,...,m, j = 1,2,...,m(i),

  12 , i i 
iii. E(αiαi´) = 
 0, otherwise,

  22 , i i , j  j 
iv. E(vijvi´j´) = 
 0, otherwise.
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4.GETTING START WITH EViews 9

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5. DATA ANALYSIS

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DESCRIPTIVE STATISTICS

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CORRELATION ANALYSIS

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POOLED OLS REGRESSION

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NORMALITY TEST

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DUMMY VARIABLES

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 6.READING THE RESULTS
Dependent Variable: CR
Method: Panel Least Squares
Date: 05/23/17 Time: 17:06 Total no of groups
Sample (adjusted): 1996 2011 Time included
Periods included: 16
n=NT
Cross-sections included: 17
Total panel (unbalanced) observations: 85

Variable Coefficient Std. Error t-Statistic Prob.

Constant C 12.83313 2.387841 5.374368 0.0000
FE -0.160617 0.039199 -4.097434 0.0001
FQ 2.032662 0.380137 5.347179 0.0000
CB 0.362423 0.185213 1.956787 0.0539
CAPR -0.203388 0.075746 -2.685126 0.0088
If this no is < 0.05
then the model is
ok.
R-squared 0.371546 Mean dependent var 6.020596
This is F test to see Adjusted R-squared 0.340123 S.D. dependent var 5.639222
whether all coeffs in
the model are diff S.E. of regression 4.580898 Akaike info criterion 5.938690
than zero. Sum squared resid 1678.770 Schwarz criterion 6.082375
Log likelihood -247.3943 Hannan-Quinn criter. 5.996484
F-statistic 11.82412 Durbin-Watson stat 0.735389
Prob(F-statistic) 0.000000 PANEL DATA WORKSHOP-23&24 MAY 2017 41
 Coefficient Std. Error t-Statistic Prob.

12.83313 2.387841 5.374368 0.0000

-0.160617 0.039199 -4.097434 0.0001
2.032662 0.380137 5.347179 0.0000
0.362423 0.185213 1.956787 0.0539
-0.203388 0.075746 -2.685126 0.0088
Coefficients of the
regressors.
Indicate how much
Y changes Two-tail p-values test the
T-values test the hypothesis that hypothesis
When X increase each coeff is diff from 0
by one unit. That each coeff is diff
To reject this, the t-value has to be from 0. To reject this,
higher than 1.96 (95% confidence P-value has to be lower
interval). If this is the case then you than 0.05 (95%). If this is
can say that the variables has a Case the you can say that
significant influence on your DV the variable has a
(Y). The higher the value the higher significant influence
the relevance of the variable. On you DV (Y)
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 R-squared 0.371546 Mean dependent var 6.020596
Adjusted R-squared 0.340123 S.D. dependent var 5.639222
S.E. of regression 4.580898 Akaike info criterion 5.938690
Sum squared resid 1678.770 Schwarz criterion 6.082375
Log likelihood -247.3943 Hannan-Quinn criter. 5.996484
F-statistic 11.82412 Durbin-Watson stat 0.735389
Prob(F-statistic) 0.000000

Adjusted R-squared shows the same

R-squared shows the amount as R-squared but adjusted by the
Of variance of Y explained by X number of cases and number of
variables.
When the number of variables is
small and the number of cases is
very large,
then Adj R-squared is closer to R-
squared
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