st: RE: Fama-MacBeth regression

["Francis, Richard N" <rnfrancis@utep.edu>]

Adrian,

Attached is the Stata code for the FM regression.

Code is from Mitch Petersen (http://www.kellogg.northwestern.edu/faculty/petersen/htm/papers/se/se_programming.htm).

Good luck!

Rick Francis
Associate Professor
Department of Accounting
College of Business Administration
University of Texas at El Paso
500 W. University Avenue
El Paso, TX  79968
Office: 915-747-7953
FAX: 915-747-8618
Email:  rnfrancis@utep.edu


-----Original Message-----
From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Adrian Stork
Sent: Friday, January 03, 2014 11:23 AM
To: statalist@hsphsun2.harvard.edu
Subject: st: Fama-MacBeth regression

Dear all

I'm trying to run a second-pass cross-sectional regression which is part of what finance researchers call a Fama-MacBeth regression.
I managed to get the beta-coefficients from the first-pass regression but now I'm stuck at the second-pass CSR.
So my dataset looks currently like this (time period starts in 1987m7 and ends 2012m12):


                   ________________portfolios________________________
       _________________coefficients__________________________

date2	exsize_1	exsize_2	exsize_3	exbm_1	exbm_2	exbm_3	betaexsize_1	betaexsize_2	betaexsize_3	betaexbm_1	betaexbm_2	betaexbm_3
.... etc.
1989m6	.31	3.41	3.10	2.83	2.25	1.02	.64	.68	.67	.63	.76	.65
1989m7	1.16	1.85	4.93	9.40	3.31	4.65	.64	.68	.67	.63	.76	.65
1989m8	2.45	2.94	6.85	4.50	3.82	4.76	.64	.68	.67	.63	.76	.65
1989m9	-.60	1.38	-1.56	2.69	-.72	-1.38	.64	.68	.67	.63	.76	.65
1989m10	-1.46	-1.41	-.89	.11	-1.25	1.89	.64	.68	.67	.63	.76	.65
etc.

Now I need to regress at each individual month all the portfolios against the their estimated coefficient.
But that is exactly what I'm not able to manage. In the end there should be one figure at each time period t which corresponds to the new coefficient from the individual cross-sectional regressions As you can see I merely added the prefix "beta" for the coefficients with respect to its portfolio.

The best I could come with is the following:

.ds ex*

.forval i=330/635{
.foreach v of varlist `r(varlist)' {
.	regress `v' beta`v' if date2==`i'
.	gen lambda`v' = _b[beta`v']
.}
.}

but here the error message is "insufficient observations" although all obsevations are nonmissing.
I know there is a code from Kellog University
(http://www.kellogg.northwestern.edu/faculty/petersen/htm/papers/se/fm.ado)
but that does not include the first pass regression and brings me to the same point. Also I want to understand the entire procedure and follow my results.
Thus, does anyone have an idea how to retrieve the second pass regression coefficients (the beta coefficient in the second pass regression is perfectly fine and enough - no need for the constant or the residuals right now).
I guess reshaping the dataset might also be an alternative beginning compared to the code I wrote above.

Best,
Adrian
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Attachment: fm.ado
Description: fm.ado