Home Forums ASREG : Rolling window and Fama-MacBeth Regressions asreg root mean squared RMSE in Stata

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• Phil Maier
Guest
Post count: 118

First, I would like to thank you for your excellent Stata programs. These have extremely helped me conduct empirical asset pricing analyses.

I was wondering if I could ask you a question about asreg.

When I run a simple regression of, for instance market excess return on stock excess return, I use the rmse option to display the root mean squared error:

asreg excret mktrf, rmse

Alternatively, I could use:

gen rmse =.
reg excret mktrf
predict res, residuals
sum res, detail
replace rmse=r(sd)

However, the outcomes for the root mean squared error differ slightly and I have no clue why.

Do you happen to have any idea what the reason behind this is?

Thank you very much in advance.

Best regards,
Phil

Attaullah Shah
Keymaster
Post count: 69

Here is my quick proof of asreg accuracy.

. sysuse auto, clear
(1978 Automobile Data)

. reg price mpg rep78

Source |       SS           df       MS      Number of obs   =        69
-------------+----------------------------------   F(2, 66)        =     11.06
Model |   144754063         2  72377031.7   Prob > F        =    0.0001
Residual |   432042896        66  6546104.48   R-squared       =    0.2510
Total |   576796959        68  8482308.22   Root MSE        =    2558.5

------------------------------------------------------------------------------
price |      Coef.   Std. Err.      t    P>|t|     [95% Conf. Interval]
-------------+----------------------------------------------------------------
mpg |  -271.6425   57.77115    -4.70   0.000    -386.9864   -156.2987
rep78 |   666.9568   342.3559     1.95   0.056     -16.5789    1350.492
_cons |   9657.754    1346.54     7.17   0.000       6969.3    12346.21
------------------------------------------------------------------------------

. asreg reg price mpg rep78, rmse
+-----------+