Using Pooled Time-Series and Cross-Section Data to Test the Firm and Time Effects in Financial Analyses

Hui-shyong Chang and Cheng F. Lee

Journal of Financial and Quantitative Analysis, 1977, vol. 12, issue 3, 457-471

Abstract: In this study two alternative techniques to analyze pooled time-series and cross-section data are used to test the importance of firm effect and time effect in the financial analysis. These techniques are also integrated with the functional form parameter estimation method to show the importance of appropriate functional form in handling a pooled time-series and cross-section type econometric model. The data on the electric industry show that both the time effect and cross-section effect are of importance in explaining stock price variation. It is also found that linear form (and/or) log-linear form is not always appropriate in testing the importance of both time effect and firm effect in financial analyses.

Date: 1977
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