SOME IMPROVED CLASSIFICATION-BASED RIDGE PARAMETER OF HOERL AND KENNARD ESTIMATION TECHNIQUES

Year 2016, Volume: 9 Issue: 3, 93 - 106, 01.09.2016

Adewale F. Lukman Kayode Ayinde.

Abstract

In a linear regression model, it is often assumed that the explanatory variables are independent.This assumption is often violated and Ridge Regression estimator introduced by Hoerl and Kennard (1970)has been identified to be more efficient than ordinary least square (OLS) in handling it. However, it requiresa ridge parameter, K, of which many have been proposed. In this study, estimators based on Hoerl andKennard were classified into different forms and various types and some modifications were proposed toimprove it. Investigation were done by conducting 1000 Monte-Carlo experiments under five (5) levels ofmulticollinearity, three (3) levels of error variance and five levels of sample size. For the purpose of comparingthe performance of the improved ridge parameter with the existing ones, the number of times the MSE ofthe improved ridge parameter is less than the existing ones is counted over the levels of multicollinearity (5)and error variance (3). Also, a maximum of fifteen (15) counts is expected. Results show that the improvedridge parameters proposed in this study are better than the existing ones most especially with the quantity

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