st: matrix not positive definite with fixed effects and clustering

[Daniel Simon <dhs29@cornell.edu>]

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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