Near Singular Matrix Error

For technical questions regarding estimation of single equations, systems, VARs, Factor analysis and State Space Models in EViews. General econometric questions and advice should go in the Econometric Discussions forum.

Moderators: EViews Gareth, EViews Moderator

startz
Non-normality and collinearity are NOT problems!
Posts: 3370
Joined: Wed Sep 17, 2008 2:25 pm

Re: Near Singular Matrix Error

Postby startz » Sat Jul 14, 2018 7:58 am

Even if there is heteroskedasticity, the estimated equations should be unbiased. What would you differently if you found there is heteroskedasticity?

Alina03
Posts: 16
Joined: Sat Jul 14, 2018 12:49 am

Re: Near Singular Matrix Error

Postby Alina03 » Sat Jul 14, 2018 8:06 am

What would you recommend to do in this case, as long as I can t perform the test on that 6 variables?

Alina03
Posts: 16
Joined: Sat Jul 14, 2018 12:49 am

Re: Near Singular Matrix Error

Postby Alina03 » Sat Jul 14, 2018 8:11 am

I don t know if there is heteroskedasticity or not. I want to test it.

startz
Non-normality and collinearity are NOT problems!
Posts: 3370
Joined: Wed Sep 17, 2008 2:25 pm

Re: Near Singular Matrix Error

Postby startz » Sat Jul 14, 2018 8:16 am

I would just proceed without the test.

And why do you want to test for heteroskedasticity anyway?

Alina03
Posts: 16
Joined: Sat Jul 14, 2018 12:49 am

Re: Near Singular Matrix Error

Postby Alina03 » Sat Jul 14, 2018 8:32 am

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).

startz
Non-normality and collinearity are NOT problems!
Posts: 3370
Joined: Wed Sep 17, 2008 2:25 pm

Re: Near Singular Matrix Error

Postby startz » Sat Jul 14, 2018 8:37 am

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.

Alina03
Posts: 16
Joined: Sat Jul 14, 2018 12:49 am

Re: Near Singular Matrix Error

Postby Alina03 » Sat Jul 14, 2018 8:57 am

Here is my autocorrelation test. Could I choose the first lag?
Attachments
Capture3.JPG
Capture3.JPG (64.29 KiB) Viewed 332 times

startz
Non-normality and collinearity are NOT problems!
Posts: 3370
Joined: Wed Sep 17, 2008 2:25 pm

Re: Near Singular Matrix Error

Postby startz » Sat Jul 14, 2018 9:24 am

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.

Alina03
Posts: 16
Joined: Sat Jul 14, 2018 12:49 am

Re: Near Singular Matrix Error

Postby Alina03 » Sat Jul 14, 2018 10:05 am

Could I run this model with just one lag?

startz
Non-normality and collinearity are NOT problems!
Posts: 3370
Joined: Wed Sep 17, 2008 2:25 pm

Re: Near Singular Matrix Error

Postby startz » Sat Jul 14, 2018 10:15 am

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.

Alina03
Posts: 16
Joined: Sat Jul 14, 2018 12:49 am

Re: Near Singular Matrix Error

Postby Alina03 » Sat Jul 14, 2018 10:19 am

Thank you so much for all you advices!

Alina03
Posts: 16
Joined: Sat Jul 14, 2018 12:49 am

Re: Near Singular Matrix Error

Postby Alina03 » Sat Jul 14, 2018 10:35 am

Sorry, I forgot. Should I eliminate high correlation between variables before I create the VAR?

startz
Non-normality and collinearity are NOT problems!
Posts: 3370
Joined: Wed Sep 17, 2008 2:25 pm

Re: Near Singular Matrix Error

Postby startz » Sat Jul 14, 2018 10:45 am

No, the VAR is fine with highly correlated variables.

Alina03
Posts: 16
Joined: Sat Jul 14, 2018 12:49 am

Re: Near Singular Matrix Error

Postby Alina03 » Sun Jul 15, 2018 5:31 am

How can I solve the problem if the normality test is p 0.000, in a VAR model?

startz
Non-normality and collinearity are NOT problems!
Posts: 3370
Joined: Wed Sep 17, 2008 2:25 pm

Re: Near Singular Matrix Error

Postby startz » Sun Jul 15, 2018 6:13 am

What do you think the problem is?


Return to “Estimation”

Who is online

Users browsing this forum: No registered users and 14 guests