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Fixed Effects in a Regression
bobby slob
posted Mar 19, 2018

Hello,

Im developing a CustomFactor that uses a linear regression, I have been using the function regression from statsmodels

from statsmodels import regression  
results = regression.linear_model.OLS(y, X).fit()

I want to include firm fixed effects, my idea was to use 

from linearmodels import PanelOLS

But it seems like quantopian does not recognise that library. I also tried creating dummy variables for the assets in the CustomFactor but that is super inefficient and was taking a lot of time.

Has anyone used fixed effects in a regression in quantopian?

Thank you

2 responses
Terje Jacobsen
Mar 7, 2020

Hi,
I would recommend doing it using the statsmodel library, which has several options for robust standard errors - Statsmodel reference

Can also recommend these two papers on the topic for financial panel regressions:
Simple Formulas for Standard Errors that Cluster by Both Firm and Time

Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches

aashutosh vijayant
Mar 8, 2020

Hi,

You can model fixed effects by simply including dummy variables for the groups which you can get one hot encoded easily via pandas.get_dummies function

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