CODEWITHSUNDEEP
rregressionsystemfit
Dave13
Dave13

Reputation: 55

R SUR regressions

I am doing an event study in R. I want to use a SUR model, as the event windows are overlapping. Here is some code with which you can create the data I use and what I have done so far: 

#data
library("systemfit")
library("plm")
nederland<- read.table("https://pastebin.com/raw.php?i=93qFnEir", sep=";", header=TRUE)
nedpanel<-pdata.frame(nederland, c("id", "t"))
cyprus<- read.table("https://pastebin.com/raw.php?i=93qFnEir", sep=";", header=TRUE)
cyppanel<-pdata.frame(cyprus, c("id", "t"))
#SUR framework
nederland_sur<-systemfit(returns ~ Price + Pre + Event + Post, method = "SUR",data = nedpanel)
cyprus_sur<-systemfit(returns ~ Price + Pre + Event + Post, method = "SUR",data = cyppanel)

Just a quick explanation on the regression equation: I am trying to single out effects on stock returns (dependent variable) at the event date (event dummy=1). Also, there is a dummy on the day before (=pre) and after (=post) the event day. Price is a control variable.

The problem is that the two datasets, cyprus and nederland, overlap. The data set nederland starts on February 1st 2013 and the data set cyprus starts on February 11th 2013. Both go back 87 days for each entity. This implies that the overlap of the two event windows is 77 days.

Therefore, there might be a correlation of the error terms. In order to obtain correct standard errors, I want to estimate these two events simultaneously, using an SUR model.

What I did so far does not seem correct. How can estimate the event in the Netherlands and the event in Cyprus simultaneously instead of estimating one after the other?

Upvotes: 2

Views: 194

Answers (0)

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