An Efficient Estimation Procedure For Determining Ridge Regression Parameter

A common problem in multiple regression models is multicollinearity, which produces undesirable effects on the least squares estimator. One of the popular methods for handling this problem is ridge regression estimation. In ridge regression, ridge parameter or biasing constant plays an important role in parameter estimation. Many researchers are suggested various procedures for determining the ridge parameter. In this study, we introduce an alternative procedure for determining the ridge parameter. The efficiency of the proposed procedure is evaluated and compared with some existing procedures in the literature, through simulation study in terms of Mean Square Error (MSE). The procedure developed in this study seems to be very reasonable because of having smaller MSE.