Near Singular Matrix Error
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- Non-normality and collinearity are NOT problems!
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Re: Near Singular Matrix Error
Even if there is heteroskedasticity, the estimated equations should be unbiased. What would you differently if you found there is heteroskedasticity?
Re: Near Singular Matrix Error
What would you recommend to do in this case, as long as I can t perform the test on that 6 variables?
Re: Near Singular Matrix Error
I don t know if there is heteroskedasticity or not. I want to test it.
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- Non-normality and collinearity are NOT problems!
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Re: Near Singular Matrix Error
I would just proceed without the test.
And why do you want to test for heteroskedasticity anyway?
And why do you want to test for heteroskedasticity anyway?
Re: Near Singular Matrix Error
Because I read in an article that the VAR models have to meet the conditions regarding the quality of the residuals - the normal distribution (Normality test), the absence of heteroskedasticity (White heteroskedasticity test) and the lack of autocorrelation of the errors (Autocorrelation LM test).
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- Non-normality and collinearity are NOT problems!
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Re: Near Singular Matrix Error
The article is just wrong.
A VAR is just a collection of least squares regressions. Normality and heteroskedasticity matter for coefficient tests, but usually no one is interested in doing those for a VAR. Autocorrelation does matter-it's usually handled by adding lags to the VAR.
A VAR is just a collection of least squares regressions. Normality and heteroskedasticity matter for coefficient tests, but usually no one is interested in doing those for a VAR. Autocorrelation does matter-it's usually handled by adding lags to the VAR.
Re: Near Singular Matrix Error
Here is my autocorrelation test. Could I choose the first lag?
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- Non-normality and collinearity are NOT problems!
- Posts: 3775
- Joined: Wed Sep 17, 2008 2:25 pm
Re: Near Singular Matrix Error
This probably suggests adding one more lag to the VAR. But you have very few observations, so it's not entirely obvious whether you should.
Re: Near Singular Matrix Error
Could I run this model with just one lag?
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- Non-normality and collinearity are NOT problems!
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Re: Near Singular Matrix Error
Perhaps run with one lag and run with two and see if it makes any difference. The real issue is that only having 20 observations limits what you can do.
Re: Near Singular Matrix Error
Thank you so much for all you advices!
Re: Near Singular Matrix Error
Sorry, I forgot. Should I eliminate high correlation between variables before I create the VAR?
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- Non-normality and collinearity are NOT problems!
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Re: Near Singular Matrix Error
No, the VAR is fine with highly correlated variables.
Re: Near Singular Matrix Error
How can I solve the problem if the normality test is p 0.000, in a VAR model?
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- Non-normality and collinearity are NOT problems!
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Re: Near Singular Matrix Error
What do you think the problem is?
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