Stata does not contain a routine for estimating the coefficients and standard errors by famamacbeth that i know of, but i have written an ado file which you can download. Rsquared which is provided in the header of the xtfmb program is computed. I am using reghdfeon a daily basis i love to estimate highlydimensional fixed effects linear models and i would like to know if you would be able to implement a famamacbeth procedure for reghdfe. Do you know any implemented or easily implementable method in r to run a nw correction of the std errors in a fmb regression. How is fama macbeth regression different from panel data. The program allows you to specify a by variable for fama. I asked the this question on quantstackexchange i know, it. With my current dataset i had no trouble to run the regression, although i can not use the lag option, to do the neweywest test as stata says that date is not regularly spaced, the same happens if i start it by organizing it. Fama macbeth 1973 regressions with shanken correction. Fama and macbeth 1973 propose a sequential timeseries of crosssections procedure that produces standard errors robust to correlation between.
Can fama macbeth regression only be applied in funds returns panel data. Huber 1967 and rogers 1983 show how to compute clustered standard errors which are robust. Dec 18, 2014 now i would like to run the same regression in fama macbeth method. First, for some background information read kevin gouldings blog post, mitchell petersens programming advice, mahmood arais papernote and code there is an earlier version of the code with some more comments in it. Query regarding fama macbeth regression matlab answers. Im trying to get neweywest standard errors to work with the output of pmg mean groupsfama macbeth estimator from the plm package. Usually, in finance, a fixed effect concerns a firm effect dummy for firms, while famamacbeth is designed to account for a time effect petersen 2008. Empirical asset pricing seppo pynn onen department of mathematics and statistics, university of vaasa, finland. Momentum, reversals, and other puzzles in famamacbeth crosssectional regressions two of the bestestablished anomalies in empirical asset pricing are reversals and momentum. Jun 15, 2016 i am using reghdfeon a daily basis i love to estimate highlydimensional fixed effects linear models and i would like to know if you would be able to implement a fama macbeth procedure for reghdfe. Correcting standard errors andrew johnston economics. However, if both crosssectional and timeseries dependencies are suspected in the data set, then neweywest consistent standard errors can be an acceptable. Usually, in finance, a fixed effect concerns a firm effect dummy for firms, while fama macbeth is designed to account for a time effect petersen 2008. As seen in section 1, ols and fama macbeth standard errors are biased in this case, while standard errors clustered by firm are unbiased results available from the author.
Whether famamacbeth or traditional panel data regressions e. We have developed easy to use yet robust codes for fama and macbeth procedure with shanken correction. Then, in the second step, the final coefficient estimates are obtained as the average of the first step coefficient estimates. Does anyone know if there is a package that would run famamacbeth regressions in r and calculate the standard errors. In the first step, for each single time period a crosssectional regression is performed. Fama and frenchs fivefactor asset pricing model duration. In panel data application, when using fama and macbeth. Fama macbeth rolling method fama macbeth stata implementation.
Fama macbeth 1973 regressions with shanken correction in. Dear fellow research colleagues, i am looking for a stata command that creates fama macbeth standard errors which are corrected for. And then in the second step, it requires calculation of t timeseries averages of the coefficients of the ncrosssectional regressions. Famamacbeth standard errors with neweywest corrections dear fellow research colleagues, i am looking for a stata command that creates fama macbeth standard errors which are corrected for autocorrelation. For instance, you could add a fmb option such that reghdfe y x, fmb newey4 estimates a fama macbeth regression with. It includes fama macbeth regressions, fixed effects, and bootstrapped standard errors, etc. Returns fama macbeth 1973 timeseries average coefficients with neweywest 1987 standard errors based. Famamacbeth and clusterrobust by firm and time standard. After updateting the tstatistics changed dramatically, but the fstatistic required to determine the significance level of r2 didnt change.
Fama macbeth regression with stata statistics help. However, i have not seen anything with respect to fama macbeth. Does neweywest standard errors affects the significance. This page shows how to run regressions with fixed effect or clustered standard errors, or fama macbeth regressions in sas. Anyone happen to know how to formulate the fama macbeth procedure and what are the implications of switching from panel regression to fama macbeth regression. My dataset is an unbalanced paneldataset from the year 19802010, where. The first step involves estimation of n crosssectional regressions and the second step involves t timeseries averages of the coefficients of the ncrosssectional regressions. Dear fellow research colleagues, i am looking for a stata command that creates fama macbeth standard errors which are corrected for autocorrelation.
The famamcbeth 1973 regression is a twostep procedure. Daniel hoechle additional contact information daniel hoechle. Famamacbeth standard errors with neweywest corrections stata. I am using the xtfmb program to run the fama macbeth regration. External links econterms glossary of economic research famamacbeth regression. Shanken 1992 suggested a correction to the standard errors of the estimates. Fama macbeth and double clustering presents inconsistent results. Fama macbeth standard errors with neweywest corrections dear fellow research colleagues, i am looking for a stata command that creates fama macbeth standard errors which are corrected for autocorrelation. Newey west in famamacbeth regression economics job. As seen in section 1, ols and famamacbeth standard errors are biased in this case, while standard errors clustered by firm are unbiased results available from the author. Sorry for a basic question, but i was unable to find the answer on my own. Fama macbeth and clusterrobust by firm and time standard errors in r. Famamacbeth rolling method famamacbeth stata implementation monthly rolling famamacbeth gmm approach. Newey and west standard errors, a neweywest estimator is.
The standard command for running a regression in stata is. University of basel statistical software components from boston college department of economics. Using neweywest test at fama macbeth regression problem. In panel data application, when using fama and macbeth regression is preferable over the fixed or random effect model. For instance, you could add a fmb option such that reghdfe y x, fmb newey4 estimates a fama macbeth regression with newey standard errors. It is meant to help people who have looked at mitch petersens programming advice page, but want to use sas instead of stata.
The program estimates ols standard errors, standard errors clustered by firm, and famamacbeth standard errors. Programming advice finance panel data sets kellogg school of. It includes famamacbeth regressions, fixed effects, and bootstrapped standard errors, etc. Famamacbeth standard errors with neweywest corrections. Whether fama macbeth or traditional panel data regressions e. This produces white standard errors which are robust to within cluster correlation clustered or rogers. The program allows you to specify a by variable for famamacbeth. The codes need just a basic understanding of stata. Leastsquares vs famamacbeth article in ssrn electronic journal march 2008 with 2,968 reads how we measure reads. Famamacbeth standard errors with neweywest corrections dear fellow research colleagues, i am looking for a. Standard errors are wrong anyways, as you have an eiv problem because of the estimated betas from the first step. This program simulates a data set with a firm effect and then estimates the coefficients using ols and famamacbeth.
It is meant to help people who have looked at mitch petersens programming advice page, but want to use sas instead of stata mitch has posted results using a test data set that you can use to compare the output below to see how well they agree. Famamacbeth and clusterrobust by firm and time standard errors in r. May 21, 2014 i am using the xtfmb program to run the fama macbeth regration. I noticed that during the recent decade most of papers, which use fama macbeth regressions compute neweywest standard errors. I noticed that during the recent decade most of papers, which use famamacbeth regressions compute neweywest standard errors. Dear statalist, i am trying to run a famamacbeth regression and am running. The results are saved for each iteration, and the means and standard deviations are calculated and displaced. As a result, the software and product team might have to work hours on some prototype that have no effect whatsoever on the companys bottom line. Oct 26, 2010 in this case, there is only a firm effect left in the data. Dear all im trying to run a secondpass crosssectional regression which is part of what finance researchers call a fama macbeth regression. This is generally an acceptable solution when there is a large number of crosssectional.
This page shows how to run regressions with fixed effect or clustered standard errors, or famamacbeth regressions in sas. Momentum, reversals, and other puzzles in famamacbeth. The standard errors are adjusted for crosssectional dependence. Fama macbeth and double clustering presents inconsistent. However, i have not seen anything with respect to famamacbeth. Oct 20, 2012 im using stata 12 and installed module to run fama macbeth, but i need to know the steps to apply fama macbeth in stata as i researched for it in stata by typing findit famamacbeth and by checking the menues but couldnt find it. One quick question regarding the methodology used in the addin is this a static famamacbeth in which the time series regression is over the entire period and the coefficients are then used for the cross sectional regression. The famamacbeth regression is a method used to estimate parameters for asset pricing. On april 23, 2014, statalist moved from an email list to a forum, based at. I am aware of the sandwich package and its ability to estimate neweywest standard errors, as well as providing functions for clustering. It involves estimation of n crosssectional regressions in the first step.
According to the literature the standard errors should be corrected via neweywest. Sometimes it is convenient to handle raw data in sas and then perform statistical analysis in stata. Trial software query regarding fama macbeth regression. Petersen discussing the estimation of famamacbeth and clustered standard errors in various statistical packages stata, sas, r. Note that fama macbeth regressions provide standard errors corrected only for crosssectional correlation. In this case, there is only a firm effect left in the data.
I run fama macbeth fm and double clustering to correct for the standard error, but two models give inconsistent results,i. Is there a statistical test shedding light on this issue. I tried to find detailed description of this procedure in the books on. Does anyone know if there is a package that would run fama macbeth regressions in r and calculate the standard errors. I will appreciate any kind of guidance about the detailed. Im using stata 12 and installed module to run fama macbeth, but i need to know the steps to apply famamacbeth in stata as i researched for it in stata by typing findit famamacbeth and by checking the menues but couldnt find it. These anomalies are particularly challenging to market e ciency because they appear to violate weakform market e ciency fama 1970, 1991. Date prev date next thread prev thread next date index thread index.
Neweywest standard errors in famamacbeth regression. The problem is that my matrices y and x both contain nans. Jun 02, 2012 ever wondered how to estimate fama macbeth or clusterrobust standard errors in r. Returns famamacbeth 1973 timeseries average coefficients with neweywest 1987 standard errors based. Ever wondered how to estimate famamacbeth or clusterrobust standard errors in r. Statistically significant result, when theres no effect in reality. Programming advice finance panel data sets kellogg. Petersen discussing the estimation of fama macbeth and clustered standard errors in various statistical packages stata, sas, r.
Is there any impact on the fstatistic by using neweywest standard errors. Stata does not contain a routine for estimating the coefficients and standard errors by fama macbeth that i know of, but i have written an ado file which you can download. Neweywest standard errors with mean groupsfamamacbeth. Stata module to execute famamacbeth twostep panel regression, statistical software components s456786, boston college department of economics, revised 26 sep 2011.
With my current dataset i had no trouble to run the regression, although i can not use the lag option, to do the neweywest test as stata says that date is not regularly spaced, the same happens if i start it by organizing it by the ticker. Check recent papers on the eiv problem, there are some solutions out there how to properly do this. This method does not help for nw correction of the standard errors. Fama and macbeth procedure the fama and macbeth 1973 procedure is a twostep process.
Petersen discussing the estimation of famamacbeth and clustered. Three common methods are 1 robust standard errors not to be confused with robust regression, 2 bootstrap standard errors, and 3 jacknife standard errors. Neweywest standard errors option newey specifies the number of lags for estimation of neweywest consistent standard errors. Because of autocorrelation there is the need to update the summary with newey west standard errors. I simply compute the mean of the vector lambda and the standard errors. Switching from panel regression to fama macbeth regression. The stata command newey will estimate the coefficients of a regression using ols and generate neweywest standard errors. Stata module to execute famamacbeth twostep panel regression. Software and programming for research 11,795 macroeconomics 15,054 microeconomics 8,176 job market. Stata module to estimate rolling window regressions. The fama mcbeth 1973 regression is a twostep procedure. I am trying to replicate famamacbeth regression for the example in the add in, but i dont know the code to run ols corrected for heteroskedasticity and autocorrelation, that is, using neweywest hac standard errors correction. I managed to get the betacoefficients from the firstpass regression but now im stuck at the secondpass csr. Stas pointed out that clustered ses are never unbiased.
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