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From |
"Braunfels, Philipp (Stud. SBE / Alumni)" <P.Braunfels@student.maastrichtuniversity.nl> |

To |
"statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu> |

Subject |
st: Fama MacBeth Regression |

Date |
Thu, 19 Jul 2012 18:55:47 +0200 |

Dear statlisters, I want to run a fama macbeth regression and have a question regarding the different options and the two step procedure. Upfront, I have an unbalanced panel of 1500 companies over 10 years of monthly data (=100 months). Is it important that the panel is balanced or unbalances? I looked up that the command -xtfmb- performs a fama macbeth regression. However I could not find any information about the different options: "lag(#)", "verbose", and "level" (the help file did not make it clear to me). So I want to run a regression of three independent variables on excess return: -xtfmb return x1 x2 x3, "option" - available options "lag(#)", "verbose", "level(#)" Question 1) If I run the above model with the "verbose" option, does this mean that step 1 (individual time series regression) and 2 (cross section regression for each month) of the Fama MacBeth procedure are automatically carried out? When I run the model I only get the Cross-section output (step 2) for my 100 months of data. Furthermore, my x1 variable (market return) is zero for all months. Might this be due to some specification error? If I check for the values of my market return with -sum- I get: Variable | Obs Mean Std. Dev. Min Max -------------+-------------------------------------------------------- market| 201189 .0028133 .0487276 -.2114486 .1068373 Question 2) is it correct, that if I use the "lag(#)" option e.g. "lag(4)" that I get newey-west adjusted standard errors? How many lags should one use? Furthermore, my -xtfmb. lag(4)- output always omitts my x1 variable (market return). why is that? Question 3) is it important to define "level(#)" or is the 95% confidence interval assumed here (which would be suitable for my purposes)? I am very thankful for any advise since I am very new to the topic of Fama MacBeth regressions. greets! * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

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