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Re: st: can stata perform ridge regression


From   Richard Williams <Richard.A.Williams.5@nd.edu>
To   statalist@hsphsun2.harvard.edu, "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   Re: st: can stata perform ridge regression
Date   Sat, 13 Mar 2004 10:06:44 -0500

At 10:14 PM 2/13/2004 +0800, rghuang wrote:
when multicollinearity,it is not suitable to use ols regression.but can use ridge regression,can stata do it?if it can not,how stata deal with multicollinearity?
First off, it is still suitable to use OLS. Estimates remain unbiased. There is almost always some degree of multicollinearity, so how problematic multicollineairity is depends on how extreme it is.

-findit ridge regression- yields a few hits; I can't vouch for how good they work. Greene notes in his Econometric Analysis, 4th edition, p. 258 that ridge regression produces biased estimators and hence has seen little practical use.

For some general discussions on diagnosing and dealing with multicollinearity, see

http://www.nd.edu/~rwilliam/xsoc593/lectures/l03.pdf

http://www.ats.ucla.edu/stat/stata/modules/reg/multico.htm

There have also been some recent discussions of multicollinearity on Statalist; search the archives.

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Richard Williams, Notre Dame Dept of Sociology
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