2-pass regression with time series data

[fan]

Hi Tom,

I am trying to apply 2-pass regression with time series data I have. I would like to how to use the coefficient estimates from my first equation as my regressors in my second equation. Many Thanks

[TomDoan]

Isn't that the same basic idea as Fama and Macbeth? Just save the coefficients into series and use them as data in the second regression.

[fan]

Isn't that the same basic idea as Fama and Macbeth? Just save the coefficients into series and use them as data in the second regression.

Thank you, Tom. I tried as you suggested here. but my code did not work. Could you please kindly take a look my code?

Code: Select all

linreg y
# constant x
compute beta1=%beta(1), beta2=%beta(2)

linreg y
# beta1 beta2

[TomDoan]

Don't you need to run separate regressions over t for each SB (whatever the latter index set is) and collect the coefficients from those?

[fan]

Don't you need to run separate regressions over t for each SB (whatever the latter index set is) and collect the coefficients from those?

Thank you for your quick reply. I thought I could have the coefficients for each SB from my first regression.Is it not right?

Code: Select all

linreg sb1
    # constant x
    compute beta1=%beta(1), beta2=%beta(2)

    linreg sb1
    # beta1 beta2

[TomDoan]

No. One LINREG does one regression. You need a whole collection of regressions at the first stage.