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.
    You can check your calculation

    . 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
    -------------+----------------------------------   Adj R-squared   =    0.2283
           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
    variable reg not found
    r(111);
    
    . asreg  price mpg rep78, rmse
    
    . list _rmse in 1
    
         +-----------+
         |     _rmse |
         |-----------|
      1. | 2558.5356 |
         +-----------+
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