Hi,
I simulate an AR(1) time series with coefficient "1.2". Then when I run the Dickey Fuller test, I get "Near singular matrix" message. I suppose that it has to be with Ho (coefficient=0) and H1 (coefficient < 1), but I can't explain it.
Thanks in advance
Near singular matrix  DF
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 Nonnormality and collinearity are NOT problems!
 Posts: 3443
 Joined: Wed Sep 17, 2008 2:25 pm
Re: Near singular matrix  DF
You might want to post your workfile and exact commands.
Re: Near singular matrix  DF
I found that the problem is the maximum lag length to consider when performing automatic lag length selection. If I set it on '0', there is no problem; if it is higher, I get the message.
Here is the code. Thanks
Here is the code. Thanks
Code: Select all
'Workfile
new workfile ejercicios q 1951:01 2000:04
'White noise
series e=nrnd
'TSsimulation
smpl 1951:01 1951:01
series y1=0
smpl 1951:02 1951:02
smpl 1951:02 @last
series y1= 2*y1(1) + e
smpl @all
'Unit Root Test  ADF
y1.uroot(adf, const, trend, maxlag=0) 'maxlag=0, OK
y1.uroot(adf, const, trend, maxlag=1) 'maxlag=0, near singular matrix

 Nonnormality and collinearity are NOT problems!
 Posts: 3443
 Joined: Wed Sep 17, 2008 2:25 pm
Re: Near singular matrix  DF
I believe you're getting numerical problems. Note that the final values of y1 are around 10^60
Re: Near singular matrix  DF
Thanks, it worked with less observations.
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