Ridge Regression – A Simulation Study

Abstract

In this article we assess the suitability of two new ridge estimators by means of a simulation study. We compare these estimators with well-known ridge estimators. We also make direct comparisons between the ordinary least squares (OLS) estimator and the ridge estimators by using ratio of the average total mean square error of the OLS estimator and the ridge estimators. We find that the new estimators perform well under certain conditions.

Keywords:

• Collinearity
• Information criterion
• Ridge constant
• Ridge regression
• Total mean square error

Mathematics Subject Classification:

• 62-xx
• 62J-xx
• 62J07

Acknowledgment

The authors thank the anonymous referee for comments and suggestions which improved the original version of this article.