Dear all,

How do I properly run a Fama-Macbeth regression with a cross-sectional invariant variable?

Apologize for attaching screenshot instead of proper tables — still have to learn how to do it.

I have a panel of 53 firms (

Here are 24 first rows of my data:

Here is the summary of my variables (apologize for the screenshot):

I realized that something is not right about my approach when I tried to run a Fama-Macbeth (1973) regression using

Thank you!

How do I properly run a Fama-Macbeth regression with a cross-sectional invariant variable?

Apologize for attaching screenshot instead of proper tables — still have to learn how to do it.

I have a panel of 53 firms (

*id)*with 18 years of daily observations of:- Return (
*ret),* - Five Fama and French (2015) factors (
*rmrf*,*smb*,*hml, rmw, cma*) - Social media sentiment variable (
*sentiment*,**invariant across firms**)

Code:

* generating firmnumbers * encode id, gen(idd) drop id rename idd id * sorting as panel * xtset id date * generating beta variables * gen beta_rmrf=. gen beta_smb=. gen beta_hml=. gen beta_rmw=. gen beta_cma=. gen beta_sentiment=. * loop to calculate beta * forvalues i=1/53{ quietly reg ret rmrf smb hml rmw cma sentiment if id==`i' replace beta_rmrf=_b[rmrf] if id==`i' replace beta_smb=_b[smb] if id==`i' replace beta_hml=_b[hml] if id==`i' replace beta_rmw=_b[rmw] if id==`i' replace beta_cma=_b[cma] if id==`i' replace beta_fear=_b[fear] if id==`i' replace beta_sent=_b[sentiment] if id==`i' } * Fama Mac Beth Regression * tfmb ret beta_rmrf beta_smb beta_hml beta_rmw beta_cma beta_sent

Here is the summary of my variables (apologize for the screenshot):

I realized that something is not right about my approach when I tried to run a Fama-Macbeth (1973) regression using

*areg*commandwith*fmb*option, and it simply omitted my*sentiment*variable.Thank you!

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