What can cause multicollinearity in OLS?

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A SHAZAM User asked:

I am a student at XXX University and am using the Shazam program to create a hedonic pricing model of laptops for a fourth year course.

My problem is that I have used dummy variables to signify the makers of each laptop. When I try to perform the OLS function, I get a message saying "Matrix Inversion failed in row 19". " This usually indicates perfect multicollinearity with variable constant".

I have searched the internet to no avail for an answer. When I run the regression without the dummy variables, the OLS works. How can I perform OLS on my data including the dummy variables? Do I have to specify that they are dummy variables somewhere in the code?

asked Apr 06 '11

SHAZAMHelp 332 ● 1 ● 5 ● 16
http://econometrics.com/

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2	Try using the NOCONSTANT option on the OLS command to remove any constant Also make sure you have N-1 dummy variables. link posted Apr 06 '11 David 183 ● 1 ● 7

What can cause multicollinearity in OLS?

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