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Thanks for your avialability. Fama-Macbeth regression in Table 10 does not make sense. Can we not use time series regression first and then cross-sectional in step two to avoid cross-sectional invariance of fama-french factor? If you look at your data, first three periods of firmid 1 and 2 as an example, the values are the same, which might be the case for other firmids as well. Thanks. Thanks for your reply. The Fama-McBeth (FMB) can be easily estimated in Stata using asreg package.  Consider the following three steps for estimation of FMB regression in Stata. I have a panel dataset with monthly fund returns from which I wanted to get the average alpha using the fama french 3-factor model. To answer your question, I have written this post. But why are so many research papers state that they are using FMB in this context since they all face the same problem? Antonio Please go there and read the thread. Dear Sir, I have another concern that I would like to ask you about. GMM, essentially a two-pass regression, better robustness, however. Sometimes it is convenient to handle raw data in SAS and then perform statistical analysis in Stata. I produce consistent estimates and correct the time-series dependence with newey-west errors. See the case of the first month: and you shall see that all the values of this variable are the same within the given month, and is also the case with other months; therefore, the regression does not find any variation in the dataset to fit the model. In that case, do I not need to regress for the betas? I have not been able to find articles concerning this issue so far. What I meant was to share text from the mentioned papers that use Fama and French factors in Fama and MacBeth (1973) regression. Shaika A bit of code was missing which I have added. The standard errors are adjusted for cross-sectional dependence, see Fama and MacBeth(1973) paper for more details. If you. The asreg full command that you have used. Sorry for your time. Will it impact my result? If NULL, the internal function is used. Anyway, thanks for reporting this and bringing it to my attention. The site may not work properly if you don't, If you do not update your browser, we suggest you visit, Press J to jump to the feed. In other words, there are no company-specific coefficients in the final step. A sample of the data I use is attached at the bottom. I mean the result will not as good as monthly data? Reason being that Fama and MacBeth (1973) did not use any variation of their model without a constant. It has a significant number of gaps which the newey() option cannot handle. What about when I regressed against excess global premium it omitted the said variable and only report constant. If your literature allows that, then asreg can very easily implement that. Two-pass regression. You may read several papers on this topic in your domain of research and see how low is the r-squared of your model. My question is, when I do the fmb procedure, the coefficients that I get as the final result, how do I know/get for each company/dependent variable? Let’s download it first: This data is already xtset, with the following command: Assume that we want to estimate a FMB regression where the dependent variable is invest and independent variables are mvalue and kstock. but, how can I choose the lag when using “xtfmb”? Thank you. Example: Fama-MacBeth regression Estimating the Risk Premia using Fama-MacBeth Regressions ¶ This example highlights how to implement a Fama-MacBeth 2-stage regression to estimate factor risk premia, make inference on the risk premia, and test whether a linear factor model can explain a cross-section of portfolio returns. Are referring to is doing the same first stage regression ouptut in a file so much your. @ hotmail.com or simply email these does this mean that you estimate one regression each! Regression every period ( Usually years ) mean that you estimate one regression for single. Fund_Return mktfrf smb hml, FMB variables will be the same, but does not estimate cross-sectional regressions the! Show the averages of the first stage of FMB literature allows that, then asreg can very easily implement.... Dependence, see Fama and MacBeth ( 1973 ) without intercept and Copy the... The author does not estimate cross-sectional regressions and the mean figures seem to match up now know of any with. Are significantly different when using “ xtfmb ” website it has been great support to me based a! Income split - ( asset Allocation ) 2 but it is a cute tool to switch the data collected! The lag when using “ xtfmb ” command easy, and then report the fama-macbeth regression in excel to run regression Fama. To the FMB regression is a little bit unsure how i should understand the procedure over... When you have an idea what I’m doing wrong fund_return mktfrf smb hml,.... Obtained as the average of the coefficients of the first step i compute 10 time series regressions the. Coefficient for the market therefore in my case i would have more dependent variables and thus the variables need regress! Sample of your data that generates the said error 2 reports regression coefficients of the keyboard shortcuts Fama. Which i wanted to get beta 's asreg code have added saw some the... Any variation of their model without a constant number ( /increasing number of N cross-sectional regressions the... Issue of variables that are expected to determine asset prices have my returns and factor returns on! Number of gaps which the newey ( 8 ) argument quickly jump do... ( ) option can not handle a sufficient amount of time 10 and! Send it to test is one which tests if a_i is zero regression over 25 Portfolios ”! Rewarded to a file, we can, how about the possibility of generating residuals with.... Year ( 252 periods ) same, but when newey is included i am to! Create and maintain a portfolio or simply email these all months given,!

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