help xtfmb                                                      version:  2.0.0
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Title

    xtfmb - Fama and MacBeth (1973) procedure


Syntax

    xtfmb depvar [indepvars] [if] [in] [weight] [, level(#) verbose lag(#)]

Notes

    - You must tsset your data before using xtfmb.
    - by, may be used with xtfmb; see by.
    - aweights are allowed; see weight.



Description

    xtfmb is an implementation of the Fama and MacBeth (1973) two step
    procedure. The procedure is as follows: In the first step, for each
    single time period a cross-sectional regression is performed. Then, in
    the second step, the final coefficient estimates are obtained as the
    average of the first step coefficient estimates.

    If xtfmb is called without option lag(#), then it is possible to test for
    the significance of coefficient combinations. This works because in this
    case the second step of the Fama-MacBeth procedure is implemented by aid
    of Zellner's SUR estimation.

    When xtfmb is called with option lag(#), then heteroscedasticity and
    autocorrelation consistent Newey-West (1987) standard error estimates are
    provided.  However, in this case the current implementation of xtfmb does
    not allow for testing the significance of coefficient combinations.

    The "avg. R-squared" which is provided in the header of the xtfmb program
    is computed as the average value of the R-squares from the
    cross-sectional regressions in the first step of the Fama-MacBeth
    procedure. The coefficient estimates and R-squares of the first step
    regressions can be printed out with option verbose.


Options

    level(#); see estimation options.

    verbose lists the coefficient estimates and R-squares of the
        cross-sectional regressions from the first step of the Fama-MacBeth
        procedure.

    lag(#) computes heteroscedasticity and autocorrelation consistent
        Newey-West (1987) standard error estimates with a lag length of #
        periods.


Example

    . webuse grunfeld
    . xtfmb invest mvalue kstock, verbose
    . est store FMB

    . xtfmb invest mvalue kstock, lag(2)
    . est store FMB_Newey

    . reg invest mvalue kstock
    . est store OLS

    . est table *, b se t


References

    - Fama, E.F., and J.D. MacBeth, 1973, Risk, Return, and Equilibrium:
      Empirical tests, Journal of Political Economy 81, 607-636.

    - Newey, W.K., and K.D. West, 1987, A simple, positive semi-definite,
      heteroskedasticity and autocorrelation consistent covariance matrix,
      Econometrica 55: 703Ð708.


Author

    Daniel Hoechle, University of Basel, daniel.hoechle@unibas.ch



Also see

    Manual:  [R] regress

    Online:  tsset, regress, newey, xtreg, _robust