Modified ridge regression parameters: A comparative Monte Carlo study

Authors : Yasin ASAR, Adnan KARAİBRAHİMOĞLU, Aşır GENÇ

Pages : 827-841

View : 27 | Download : 9

Publication Date : 2014-10-01

Article Type : Research Paper

Abstract :In multiple regression analysis, the independent variables should be uncorrelated within each other. If they are highly intercorrelated, this serious problem is called multicollinearity. There are several methods to get rid of this problem and one of the most famous one is the ridge regression. In this paper, we will propose some modified ridge parameters. We will compare our estimators with some estimators proposed earlier according to mean squared error insert ignore into journalissuearticles values(MSE); criterion. All results are calculated by a Monte Carlo simulation. According to simulation study, our estimators perform better than the others in most of the situations in the sense of MSE. 
Keywords : Multicollinearity, multiple linear regression, ridge regression, ridge estimator, Monte Carlo Simulation