Using Ridge Regression Models

In this paper, we introduce many different Methods of ridge regression to solve multicollinearity problem. These Methods include ordinary ridge regression (ORR), Generalized ridge regression (GRR), and Directed ridge regression (DRR). Properties of ridge regression estimators and Methods of selecting biased ridge regression Parameter are discussed. We use data simulation to make comparison between Methods of ridge regression and ordinary least squares (OLS) Method. According to a results of This study, we found That all Methods of ridge regression are better than OLS Method when the Multicollinearity is exist.