A REGRESSION ESTIMATION METHOD FOR COLLINEAR PREDICTORS

Abstract
This paper addresses the important and pervasive condition of multicollinear predictors in regression analysis. The paper discusses the rudiments of a recently proposed “improved estimation” procedure (ridge regression analysis) to be used when the predictors are not orthogonal and compares the empirical performance of the ridge technique in estimating some known coefficients with the traditional estimation methods of least squares and stepwise regression.