I am working with a large data set (approximately 50K observations) and trying to running a Maximum likelihood estimation on 5 unknowns in Stata.
I encountered an error message of "Numerical Overflow". How can I overcome this?
I am trying to run a Stochastic Frontier analysis using the built in Stata command "frontier". The dependent variable is log of output and the independent variable is log of intermediate inputs, capital, labour, and utlities.
After a day of searching, I found out that the issue was due to starting values. Thought I should just post the answer for future reference.
The frontier command in Stata obtains its starting values using method of moments. The initial values might have produced negative infinity for the log likelihood. To get around the problem I needed to specify the starting values myself, which were obtained from a linear regression.
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