A Modified New Two-Parameter Estimator in a Linear Regression Model

The literature has shown that ordinary least squares estimator (OLSE) is not best when the explanatory variables are related, that is, when multicollinearity is present. This estimator becomes unstable and gives a misleading conclusion. In this study, a modified new two-parameter estimator based on...

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Bibliographic Details
Published in:Modelling and simulation in engineering Vol. 2019; pp. 1 - 10
Main Authors: Lukman, Adewale F., Ayinde, Kayode, Siok Kun, Sek, Adewuyi, Emmanuel T.
Format: Journal Article
Language:English
Published: New York Hindawi 01-01-2019
Hindawi Limited
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Summary:The literature has shown that ordinary least squares estimator (OLSE) is not best when the explanatory variables are related, that is, when multicollinearity is present. This estimator becomes unstable and gives a misleading conclusion. In this study, a modified new two-parameter estimator based on prior information for the vector of parameters is proposed to circumvent the problem of multicollinearity. This new estimator includes the special cases of the ordinary least squares estimator (OLSE), the ridge estimator (RRE), the Liu estimator (LE), the modified ridge estimator (MRE), and the modified Liu estimator (MLE). Furthermore, the superiority of the new estimator over OLSE, RRE, LE, MRE, MLE, and the two-parameter estimator proposed by Ozkale and Kaciranlar (2007) was obtained by using the mean squared error matrix criterion. In conclusion, a numerical example and a simulation study were conducted to illustrate the theoretical results.
ISSN:1687-5591
1687-5605
DOI:10.1155/2019/6342702