Hi Everyone,

I am running a panel regression. My panel variable is fund-month. i.e. I have monthly returns for each fund.

I want to run a panel regression of fund returns on 4 factors and use the following code:

xtset fundno month
xtreg fund_return mktret smb hml mom, vce(cluster month)


I want to cluster my errors at each month because I suspect that errors are correlated at each time t across funds. However, I am getting following error:

panels are not nested within clusters
r(498);


I checked previous relevant discussions but could not find a similar problem. I only have one observation per fund and month. Can anyone explain me my mistake here? I appreciate your helps in advance.

Best,
Ulas