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. Fama macbeth and clusterrobust by firm and time standard errors in r. 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. Neweywest standard errors with mean groupsfamamacbeth. I asked the this question on quantstackexchange i know, it.
Rsquared which is provided in the header of the xtfmb program is computed. Sorry for a basic question, but i was unable to find the answer on my own. Petersen discussing the estimation of famamacbeth and clustered standard errors in various statistical packages stata, sas, r. The famamacbeth regression is a method used to estimate parameters for asset pricing. Fama macbeth and double clustering presents inconsistent results. Many stata estimation commands support alternative ways of estimating standard errors. According to the literature the standard errors should be corrected via neweywest. Query regarding fama macbeth regression matlab answers. Fama macbeth 1973 regressions with shanken correction in. Using neweywest test at fama macbeth regression problem. In the first step, for each single time period a crosssectional regression is performed. Momentum, reversals, and other puzzles in famamacbeth crosssectional regressions two of the bestestablished anomalies in empirical asset pricing are reversals and momentum. This is generally an acceptable solution when there is a large number of.
This page shows how to run regressions with fixed effect or clustered standard errors, or fama macbeth regressions in sas. Fama macbeth rolling method fama macbeth stata implementation. 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. Because of autocorrelation there is the need to update the summary with newey west standard errors. 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. Leastsquares vs famamacbeth article in ssrn electronic journal march 2008 with 2,968 reads how we measure reads. This page shows how to run regressions with fixed effect or clustered standard errors, or famamacbeth regressions in sas. How is fama macbeth regression different from panel data. Can fama macbeth regression only be applied in funds returns panel data. Is there a statistical test shedding light on this issue. External links econterms glossary of economic research famamacbeth regression.
We have developed easy to use yet robust codes for fama and macbeth procedure with shanken correction. Jun 02, 2012 ever wondered how to estimate fama macbeth or clusterrobust standard errors in r. Then, in the second step, the final coefficient estimates are obtained as the average of the first step coefficient estimates. This method does not help for nw correction of the standard errors. 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. On april 23, 2014, statalist moved from an email list to a forum, based at. 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. 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.
In panel data application, when using fama and macbeth regression is preferable over the fixed or random effect model. Famamacbeth and clusterrobust by firm and time standard. Momentum, reversals, and other puzzles in famamacbeth. Mitchell petersens programming advice provides information and stata codes on estimating standard errors of panel data. In panel data application, when using fama and macbeth.
Huber 1967 and rogers 1983 show how to compute clustered standard errors which are robust. Check recent papers on the eiv problem, there are some solutions out there how to properly do this. And then in the second step, it requires calculation of t timeseries averages of the coefficients of the ncrosssectional regressions. Date prev date next thread prev thread next date index thread index. Returns fama macbeth 1973 timeseries average coefficients with neweywest 1987 standard errors based. Fama and macbeth 1973 propose a sequential timeseries of crosssections procedure that produces standard errors robust to correlation between. The standard command for running a regression in stata is. For instance, you could add a fmb option such that reghdfe y x, fmb newey4 estimates a fama macbeth regression with. The famamcbeth 1973 regression is a twostep procedure. May 21, 2014 i am using the xtfmb program to run the fama macbeth regration.
Dear fellow research colleagues, i am looking for a stata command that creates fama macbeth standard errors which are corrected for. Dear fellow research colleagues, i am looking for a stata command that creates fama macbeth standard errors which are corrected for autocorrelation. Sometimes it is convenient to handle raw data in sas and then perform statistical analysis in stata. Newey and west standard errors, a neweywest estimator is. Is there any impact on the fstatistic by using neweywest standard errors. 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. The program estimates ols standard errors, standard errors clustered by firm, and famamacbeth standard errors. For instance, you could add a fmb option such that reghdfe y x, fmb newey4 estimates a fama macbeth regression with newey standard errors. When appropriate, i will highlight some features of rthat make it easy and e. The problem is that my matrices y and x both contain nans.
I am using the xtfmb program to run the fama macbeth regration. This program simulates a data set with a firm effect and then estimates the coefficients using ols and famamacbeth. Does neweywest standard errors affects the significance. Petersen discussing the estimation of fama macbeth and clustered standard errors in various statistical packages stata, sas, r. The first step involves estimation of n crosssectional regressions and the second step involves t timeseries averages of the coefficients of the ncrosssectional regressions. 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. Neweywest standard errors in famamacbeth regression. Whether fama macbeth or traditional panel data regressions e. Statistically significant result, when theres no effect in reality. The standard errors are adjusted for crosssectional dependence. However, i have not seen anything with respect to famamacbeth. After updateting the tstatistics changed dramatically, but the fstatistic required to determine the significance level of r2 didnt change. The stata command newey will estimate the coefficients of a regression using ols and generate neweywest standard errors. Fama macbeth and double clustering presents inconsistent.
However, i have not seen anything with respect to fama macbeth. Standard errors are wrong anyways, as you have an eiv problem because of the estimated betas from the first step. Famamacbeth standard errors with neweywest corrections stata. I managed to get the betacoefficients from the firstpass regression but now im stuck at the secondpass csr. From a software design viewpoint, i translate some results from the recent literature petersen. Software and programming for research 11,795 macroeconomics 15,054 microeconomics 8,176 job market. Whether famamacbeth or traditional panel data regressions e.
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. 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. Does anyone know if there is a package that would run fama macbeth regressions in r and calculate the standard errors. Neweywest standard errors option newey specifies the number of lags for estimation of neweywest consistent standard errors. I run fama macbeth fm and double clustering to correct for the standard error, but two models give inconsistent results,i. Famamacbeth standard errors with neweywest corrections dear fellow research colleagues, i am looking for a. 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. I noticed that during the recent decade most of papers, which use famamacbeth regressions compute neweywest standard errors. 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. Stata module to execute famamacbeth twostep panel regression, statistical software components s456786, boston college department of economics, revised 26 sep 2011. I will appreciate any kind of guidance about the detailed. Newey west in famamacbeth regression economics job. Programming advice finance panel data sets kellogg. Famamacbeth and clusterrobust by firm and time standard errors in r.
Daniel hoechle additional contact information daniel hoechle. Three common methods are 1 robust standard errors not to be confused with robust regression, 2 bootstrap standard errors, and 3 jacknife standard errors. Returns famamacbeth 1973 timeseries average coefficients with neweywest 1987 standard errors based. The fama mcbeth 1973 regression is a twostep procedure. The program allows you to specify a by variable for famamacbeth. I am aware of the sandwich package and its ability to estimate neweywest standard errors, as well as providing functions for clustering.
Famamacbeth standard errors with neweywest corrections. This is generally an acceptable solution when there is a large number of crosssectional. It includes famamacbeth regressions, fixed effects, and bootstrapped standard errors, etc. 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. Fama macbeth regression with stata statistics help. Stas pointed out that clustered ses are never unbiased. In this case, there is only a firm effect left in the data. Note that fama macbeth regressions provide standard errors corrected only for crosssectional correlation. This produces white standard errors which are robust to within cluster correlation clustered or rogers. Correcting standard errors andrew johnston economics. Ever wondered how to estimate famamacbeth or clusterrobust standard errors in r. Alternative methods of estimating standard errors stata.
University of basel statistical software components from boston college department of economics. The codes need just a basic understanding of stata. Trial software query regarding fama macbeth regression. Fama macbeth 1973 regressions with shanken correction.
I noticed that during the recent decade most of papers, which use fama macbeth regressions compute neweywest standard errors. 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. However, if both crosssectional and timeseries dependencies are suspected in the data set, then neweywest consistent standard errors can be an acceptable. Oct 26, 2010 in this case, there is only a firm effect left in the data. 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 program allows you to specify a by variable for fama. Petersen discussing the estimation of famamacbeth and clustered. I simply compute the mean of the vector lambda and the standard errors.
Programming advice finance panel data sets kellogg school of. 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. 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. Dear all im trying to run a secondpass crosssectional regression which is part of what finance researchers call a fama macbeth regression. The results are saved for each iteration, and the means and standard deviations are calculated and displaced. Im trying to get neweywest standard errors to work with the output of pmg mean groupsfama macbeth estimator from the plm package.
Do you know any implemented or easily implementable method in r to run a nw correction of the std errors in a fmb regression. It involves estimation of n crosssectional regressions in the first step. I tried to find detailed description of this procedure in the books on. Stata module to estimate rolling window regressions. Perform one crosssectional regression, where the n coefficient estimates from 1 are your explanatory. It includes fama macbeth regressions, fixed effects, and bootstrapped standard errors, etc. 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.
Does anyone know if there is a package that would run famamacbeth regressions in r and calculate the standard errors. Empirical asset pricing seppo pynn onen department of mathematics and statistics, university of vaasa, finland. Fama and macbeth procedure the fama and macbeth 1973 procedure is a twostep process. Shanken 1992 suggested a correction to the standard errors of the estimates. Dear statalist, i am trying to run a famamacbeth regression and am running. Fama and frenchs fivefactor asset pricing model duration.
663 800 1121 1653 557 777 859 92 770 637 207 404 47 400 78 1568 94 713 794 1573 1072 180 852 79 1156 1601 434 1509 1419 40 1305 1078 374 405 1303 1246 371 590 878 1030 214 38 827 477 1454