A Modification of the Ridge Type Regression Estimators
Moawad El-Fallah Abd El-Salam
DOI : 10.3844/ajassp.2011.97.102
American Journal of Applied Sciences
Volume 8, Issue 1
Problem statement: Many regression estimators have been used to remedy multicollinearity problem. The ridge estimator has been the most popular one. However, the obtained estimate is biased. Approach: In this stuyd, we introduce an alternative shrinkage estimator, called modified unbiased ridge (MUR) estimator for coping with multicollinearity problem. This estimator is obtained from Unbiased Ridge Regression (URR) in the same way that Ordinary Ridge Regression (ORR) is obtained from Ordinary Least Squares (OLS). Properties of MUR estimator are derived. Results: The empirical study indicated that the MUR estimator is more efficient and more reliable than other estimators based on Matrix Mean Squared Error (MMSE).Conclusion: In order to solve the multicollinearity problem, the MUR estimator was recommended.
© 2011 Moawad El-Fallah Abd El-Salam. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.