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st: matrix not positive definite with fixed effects and clustering


From   Daniel Simon <dhs29@cornell.edu>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: matrix not positive definite with fixed effects and clustering
Date   Thu, 28 Sep 2006 15:01:07 -0400

Hi - I am running -areg- with a bunch of additional fixed effects, which I am using -xi- to create, and clustered standard errors. In some specifications, I get the error message "matrix not positive definite." I get the same message when I use -xtreg, fe- instead of areg. But, I do not get this message when I run the same model without clustering. In addition, I do not get this message when I drop some of the xi-created fixed effects. I include the output with the error message below. Can anyone provide me with an intuitive explanation for why the clustering and/or the fixed effects cause this problem, and whether there is any solution. thanks. Daniel

. xi:areg lncirc currentsite pgcurrentsites1 lnpubcirc1 pubmags markets lnissues chgpub i.groupyr i.pub , absorb(mag1) cluster(mag1)
i.groupyr _Igroupyra3-622 (naturally coded; _Igroupyra3 omitted)
i.pub _Ipuba5-959 (naturally coded; _Ipuba5 omitted)
matrix not positive definite
r(506);

. xi:xtreg lncirc currentsite pgcurrentsites1 lnpubcirc1 pubmags markets lnissues chgpub i.groupyr i.pub , fe i(mag1) cluster(mag1)
i.groupyr _Igroupyra3-622 (naturally coded; _Igroupyra3 omitted)
i.pub _Ipuba5-959 (naturally coded; _Ipuba5 omitted)


Here it is without clustering:

. xi:areg lncirc currentsite pgcurrentsites1 lnpubcirc1 pubmags markets lnissues chgpub i.groupyr i.pub , absorb(mag1)
i.groupyr _Igroupyra3-622 (naturally coded; _Igroupyra3 omitted)
i.pub _Ipuba5-959 (naturally coded; _Ipuba5 omitted)

Linear regression, absorbing indicators Number of obs = 5011
F(597, 3800) = 3.36
Prob > F = 0.0000
R-squared = 0.9886
Adj R-squared = 0.9849
Root MSE = .1639

------------------------------------------------------------------------------
lncirc | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
currentsite | -.0353274 .0113278 -3.12 0.002 -.0575366 -.0131183
pgcurrents~1 | .0005656 .0040061 0.14 0.888 -.0072888 .0084199
lnpubcirc1 | .0218753 .003488 6.27 0.000 .0150368 .0287138
pubmags | -.0036036 .0013778 -2.62 0.009 -.0063048 -.0009023
markets | .0029789 .0033642 0.89 0.376 -.0036169 .0095748
lnissues | .1162314 .0224666 5.17 0.000 .0721835 .1602792
chgpub | -.0099665 .0447696 -0.22 0.824 -.0977412 .0778081
_Igroupyra4 | -.0222715 .0980753 -0.23 0.820 -.2145569 .1700139
...

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