Hello guys,
I am trying to replicate an approach from Barber, Brad M. and Huang, Xing and Odean, Terrance, Which Factors Matter to Investors? Evidence from Mutual Fund Flows (May 18, 2016).
Array
from the above equation what I understand we need to use nl command to execute equation 5. I am using following command for equation 5. The command is incomplete as I have not writing the control variables and all the 18 lags, that I will add later. Following is the command.
nl (flow = {b0} + {b1}*exp(-{lambda=1}*(1-1))*L1.alphaMAR + {b2}*exp(-{lambda=1}*(2-1))*L2.alphaMAR+{b3}*exp(-{lambda=1}*(3-1))*L3.alphaMAR +{b4}*exp(-{lambda=1}*(4-1))*L4.alphaMAR +{b5}*exp(-{lambda=1}*(5-1))*L5.alphaMAR +{b6}*exp(-{lambda=1}*(6-1))*L6.alphaMAR +{b7}*exp(-{lambda=1}*(7-1))*L7.alphaMAR +{b8}*exp(-{lambda=1}*(8-1))*L8.alphaMAR +{b9}*exp(-{lambda=1}*(9-1))*L9.alphaMAR) if obs>9
Array
Now I am not sure how to run equation 6. Following is an excerpt from the paper "We apply this decay function to the monthly alphas and factor-related returns for each fund-month observation. For example, when considering flows for funds in month t, we calculate the fund’s alpha as a weighted average of the prior eighteen monthly alphas:"
Thank you in advance for any help!
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