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On Developing Ridge Regression Parameters: A Graphical investigation
Florida International University, USA.
Florida International University, USA.
Jönköping University.
Linnaeus University, Faculty of Business, Economics and Design, Linnaeus School of Business and Economics. Jönköping University. (Statistik / LNUC)ORCID iD: 0000-0002-3416-5896
2012 (English)In: SORT - Statistics and Operations Research Transactions, ISSN 1696-2281, E-ISSN 2013-8830, Vol. 36, no 2, 115-138 p.Article in journal (Refereed) Published
Abstract [en]

In this paper we review some existing and propose some new estimators for estimating the ridge parameter. All in all 19 different estimators have been studied. The investigation has been carried out using Monte Carlo simulations. A large number of different models have been investigated where the variance of the random error, the number of variables included in the model, the correlations among the explanatory variables, the sample size and the unknown coefficient vector were varied. For each model we have performed 2000 replications and presented the results both in term of figures and tables. Based on the simulation study, we found that increasing the number of correlated variable, the variance of the random error and increasing the correlation between the independent variables have negative effect on the mean squared error. When the sample size increases the mean squared error decreases even when the correlation between the independent variables and the variance of the random error are large. In all situations, the proposed estimators have smaller mean squared error than the ordinary least squares and other existing estimators.

Place, publisher, year, edition, pages
2012. Vol. 36, no 2, 115-138 p.
Keyword [en]
Linear model, LSE, MSE, Monte Carlo simulations, multicollinearity, ridge regression
National Category
Economics and Business
Research subject
Statistics/Econometrics
Identifiers
URN: urn:nbn:se:lnu:diva-23173OAI: oai:DiVA.org:lnu-23173DiVA: diva2:580487
Available from: 2012-12-21 Created: 2012-12-21 Last updated: 2016-12-14Bibliographically approved

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