Hi all!
I'm attempting to create a forecast of expected values to compare to actuals from a posttreatment period. However, I'm receiving a near singular matrix error. I'm almost certain this is caused by all the dummy variables I'm using (dom = day of month, moy = month of year, dow = day of week, mft = dummy variable for treatment). Please note: I've dropped an observation from each dummy variable in attempt to avoid perfect collinearity, but I don' think it worked.
I would like to estimate and evaluate the forecast over two time periods:
1. Pretreatment estimation, pretreatment evaluation: hoping this will allow me to use my tstat on the treatment dummy variable to gauge the confidence intervals, and also backtest the forecast
2. Pretreatment estimation, posttreatment evaluation: comparing the forecasted expected values to the actual values of the treatment period to quantify the impact of the treatment.
Please see the workfile below, containing the equation i'm attempting to estimate.
Thanks!
Bob
near singular matrix error
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near singular matrix error
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 Fe ddaethom, fe welon, fe amcangyfrifon
 Posts: 13404
 Joined: Tue Sep 16, 2008 5:38 pm

 Nonnormality and collinearity are NOT problems!
 Posts: 3779
 Joined: Wed Sep 17, 2008 2:25 pm
Re: near singular matrix error
The equation post_MRC_eq, which I recognize may not be what you used, does not have dummies dropped.
Re: near singular matrix error
I picked one observation set for each of the period/time variables and made it a 0How did you drop dummies?
for instance:
smpl @all
series moy = @month 'generate moy series
smpl if @month = @2
series moy = 0 'drop all february observations by setting to 0
would this work?

 Fe ddaethom, fe welon, fe amcangyfrifon
 Posts: 13404
 Joined: Tue Sep 16, 2008 5:38 pm
Re: near singular matrix error
No. Setting a dummy variable to zero is not removing it.
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Re: near singular matrix error
Fair :)No. Setting a dummy variable to zero is not removing it.
I have attempted many different functional forms including dropping several of the variables altogether (not just dropping observations), but I still receive the same near singular matrix error, if I have a second dummy variable along with MFT (capturing the treatment period).
Is this because at some point the included explanatory variables are all equal to the same value (1, 0, etc)?

 Nonnormality and collinearity are NOT problems!
 Posts: 3779
 Joined: Wed Sep 17, 2008 2:25 pm
Re: near singular matrix error
If you have two variables with identical values for every given observation, then that's the problem. After all, if the two are always the same how can the computer separate out their effects?
Re: near singular matrix error
Ok. That shouldn't be the case for any of the variables. They will share the same values for some observations, but not all. I'll double check tho.If you have two variables with identical values for every given observation, then that's the problem. After all, if the two are always the same how can the computer separate out their effects?
Thanks for the input!
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