Near Singular Matrix Error

[u01uw11]

Hi!

First off, I'm not entirely sure if this is the correct subforum to post this; if it isn't, I apologize.
I'm also a newcomer to both EViews and this forum, so please be gentle .
I use EViews 7.

I'm trying to estimate the effects of women on the board (binarywomen= (0,1)) an interaction term (binarywomen*logii), where logii= log(innovationintensity), where innovationintensity= R&D expenditure/total assets.

I use a few control variables, such as log(innovationintensity), log(size), age, leverage, log(capexintensity), log(agecapitalstock), and board size.

I have unbalanced (incomplete) panel data for all FTSE100 companies over the period 1993-2013.

I can estimate the regression with EITHER cross-section fixed effects (which would translate into firm fixed effects) OR period fixed effects (which would be Year fixed effects), however, when I try to do both together I get the error message "Near Singular Matrix".

I have looked through the forums and apparently this error message pops up when there are issues of multicollinearity, but can't figure out where this would be the case in my data.

I have also modelled the year dummy variables myself, and used cross-section fixed effects in eviews, but I still get the same error message.

I attached my excel file with the panel data, and the EViews workfile with the final dependent and independent variables.

The model should look like this:

logtobinq c logii logsize age leverage logcei logacs boardsize binarywomen bwlogii yr1 yr2 yr3 yr4 yr5 yr6 yr7 yr8 yr9 yr10 yr11 yr12 yr13 yr14 yr15 yr16 yr17 yr18 yr19 yr20

and using cross-section fixed effects with this regression, I get the error message "Near Singular Matrix".

Any suggestions how I can resolve this?

(PS: If I only use cross-section fixed effects EViews can use 499 observations over 13 periods and 49 cross-sections.)

[EViews Gareth]

Mathematically you can't have period fixed effects, cross-section fixed effects and cross-section trends.

[u01uw11]

Mathematically you can't have period fixed effects, cross-section fixed effects and cross-section trends.

Hey Gareth, thanks alot for helping me out!

I'm an undergrad, so please excuse my lack of econometric understanding, but I did not intentionally include cross-section trends. However, I would like to include both period fixed effects and cross-section fixed effects.

Would it be too much to ask if you could elaborate on how to do achieve this? Moreover, what exactly do you mean by cross-section trends?

The regression that I am trying to replicate has both Firm fixed effects and Year fixed effects.

This is the article, and on page 42 you can find the regression:

https://www0.gsb.columbia.edu/mygsb/fac ... tation.pdf

Regards and thanks,

Ulrich

[EViews Gareth]

In your case your age variable is a cross-section trend. It is simply a number that goes up by 1 each year.

[u01uw11]

In your case your age variable is a cross-section trend. It is simply a number that goes up by 1 each year.

Sweet, I'll try and figure out a way to work around that (unless you know one, I wouldn't mind if you share it ;) )

Thank you Gareth!

[joshchipunza]

Hi Gareth

I am running a model like this:

〖LIQ〗_(i,t) = α+D_1 〖List〗_(i,t)+〖β_1 Disclosure〗_t+β_2 〖Size〗_(i,t)+ 〖B_3 Leverage〗_(i,t)+ ε_(i,t)
where D_1 〖List〗is a dummy variable that take the value of 1 when a firm is cross listed and zero when it is cross traded.
The question is that when i run the regression in Eviews it give a feedback that its a Near Singular Matrix. I understand that it could be an issue of correlation in the variables but i just do not know how to go about it since this is how the model should be like. Your assistance will be greatly appreciated.

[Kuchkro01]

OR period fixed effects (which would be Year fixed effects), however, when I try to do both together I get the error message "Near Singular Matrix".????




Ali