Error while doing endogeneity test on RE model

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Error while doing endogeneity test on RE model

Postby aycakaratepe » Sun Mar 07, 2021 2:41 pm


Based on the result of Hausman test, I proceeded with RE model for the attached data, where my variables are as below:

Dep. variable: RoA3
Indep. variables: addedcult, addedgeo
Control variables: sales, debt, industriesnew

Afterwards, I wanted to apply endogeneity test to detect if there is any in my variables.
Specification: roa3 addedcult addedgeo sales debt industriesnew c
Panel Options --> Effects specification --> Given the Hausman test output, I choose "Random" for both cross-section and period parameters

However, I received an error as "Near singular matrix in computation of Swamy-Arora RE component variances.". Although I did not add any dummy variable to my dataset, what could be the reason for that error? How can I overcome it?

Many thanks,
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