LOS D requires us to:
distinguish between time-series and cross-sectional data
There are three major types of data: the time-series data, the cross-sectional data, and the panel data.
1. Time Series Data
a. Time-series samples are constructed by collecting the data of interest at regularly spaced intervals of time and are known as time-series data.
b. In the time series, the data is divided longitudinally, such that the multiple variables of observational units over time are obtained.
c. While creating the data samples, we must ensure that they are independent and identically distributed.
2. Cross-Sectional Data
a. Cross-sectional samples are constructed by collecting the data of interest across observational units (firms, people, and precincts) at a single point in time and are known as cross-sectional data.
b. For example, if we are looking at the free cash flow to debt ratio for US industrials, we would have to calculate this ratio at the same time period for different companies.
c. There may be more than one underlying distribution for each of such data samples.
3. Panel Data
a. The combination of the two, i.e. the time series data and the cross-sectional data, is known as panel data.
b. An example of the panel data would be the free cash flow to debt ratio for US industrials for the last 10 quarters.