Alternative Method for Choosing Ridge Parameter for Regression

The parameter estimation method based on minimum residual sum of squares is unsatisfactory in the presence of multicollinearity. Hoerl and Kennard [1] introduced alternative method called ridge regression estimator. In ridge regression, ridge parameter or biasing constant plays an important role in parameter estimation. Many researchers are suggested various methods for determining the ridge parameter. In this article, we have proposed new method for choosing the ridge parameter. The performance of the proposed method is evaluated and compared with through simulation study in terms of mean square error (MSE). The technique developed in this communication seems to be very reasonable because of having smaller MSE.