A note on some new modifications of ridge estimators
Keywords:
Monte Carlo simulation, MSE, multicollinearity, OLS, ridge estimator, ridge regressionAbstract
Ridge estimator is an alternative to ordinary least square estimator when there is multicollinearity problem. There are many proposed estimators in literature. In this paper, we propose new estimators which are modifications of the estimator suggested by Lawless and Wang (1976). A Monte Carlo experiment has been conducted for the comparison of the performances of the estimators. Mean squared error (MSE) is used as a performance criterion. The benefits of new estimators are illustrated using two real datasets. According to both simulation results and applications, our new estimators have better performances in the sense of MSE in most of the situations.
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