Correlation Based Ridge Parameters in Ridge Regression with Heteroscedastic Errors and Outliers

Abstract

This paper introduces some new estimators for estimating ridge parameter, based on correlation between response and regressor variables for ridge regression analysis. A simulation study has been made to evaluate the performance of proposed estimators based on the minimum mean squared error (MSE) criterion compared to ordinary least squares (LS) estimator and ordinary ridge regression (RR) estimator. The simulation studies demonstrated that the suggested estimators are superior to LS and RR estimators in ridge regression analysis with Heteroscedastic and/or correlated errors, outlier observations.

Keywords

• Heteroscedasticity; Multicollinearity; Mean square error; Outlier; Ridge estimator.