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st: Re: matrix not positive definite with fixed effects and clustering


From   "Rodrigo A. Alfaro" <ralfaro76@hotmail.com>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: Re: matrix not positive definite with fixed effects and clustering
Date   Thu, 28 Sep 2006 15:25:26 -0400

And robust means that you adjust your std errors to allow
non-normality to your errors. Yes if you run without cluster only
std errors will change, this happens because your cluster is the same
as id-indicator. I don't see any problem adding more id-effects as
long as you have a balanced dataset (total number of observations
= number of id times number of periods).

Days ago there were a discussion of clustering or not... therefore
I cannot suggest you to change your cluster() for robust only.
You can check that to understand why.

Rodrigo.


----- Original Message ----- 
From: "Daniel Simon" <dhs29@cornell.edu>
To: <statalist@hsphsun2.harvard.edu>
Sent: Thursday, September 28, 2006 3:01 PM
Subject: st: matrix not positive definite with fixed effects and clustering


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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