Appendix J
Random Intercept Model
(Sources: Cameron and Trivedi [1], Hsiao [2])
The random effects model can be written as
(J.1)
or
(J.2)
where . The variance–covariance matrix of is
(J.3)
Its inverse is
(J.4)
The individual-specific effects are assumed to be realizations of i.i.d. random variables with distribution and the error is i.i.d. . The model can be re-expressed as , where the error ...