Jul 31

Different data types (Quant: Econometrics)

by David Harper, CFA, FRM, CIPM

FRM | Quant |

Learning objective: Distinguish between the different types of data used for empirical analysis

Three types of data can be used for empirical analysis:

  • Time series
  • Cross-sectional
  • Pooled (combination of time series and cross-sectional)

Panel data (a.k.a., longitudinal or micropanel) data is a special type of pooled data in which the cross-sectional unit (e.g., family, company) is surveyed over time.

A portfolio example

Consider a portfolio that contains several assets. We can populate a matrix with periodic returns: each row contains periodic returns for an asset; each column is day:

image

For the portfolio, we could examine

  • Returns over time for an individual asset (time series)
  • Average return across assets on a given day (cross-sectional or spatial)
  • Returns over time for a combination of assets (pooled)

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