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

["Daniel H. Simon" <dhs29@cornell.edu>]

Hi Rodrigo - I don't understand your response. I want to be able to either 
run the model with all of the fixed effects and clustered standard errors, 
or understand why I cannot. I understand that cluster implies robust, and 
that clustering only affects my standard errors. But, I still don't 
understand why the clustering with the fixed effects yields the 
non-positive definite matrix, and whether or not there is anything I can do 
about it. Sorry if I've totally missed the point of your message. Thanks 
for the help. Daniel

At 03:25 PM 9/28/2006, Rodrigo A. Alfaro wrote:

> 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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