-----Original Message-----
From: [EMAIL PROTECTED]
[mailto:[EMAIL PROTECTED]]On Behalf Of Wuzzy
Sent: Monday, February 04, 2002 4:14 PM
To: [EMAIL PROTECTED]
Subject: Re: Interpreting mutliple regression Beta is only way?
...........
I've heard of "ridge regression" will try to investigate this area
more..
Ridge analysis perturbs the coefficient set obtained from least mean squares
regression. It does it in a way to reduce the main effects coefficient
values. The result is no longer minimum variance of the residuals, but a
more "tolerant" solution of the coefficients.
Originated by Hoerl back in the 1950's. Basically its effectiveness is in
its ability to make reasonable (and better) predictions of Y values from X
values outside of the data set used to obtain coefficient values. The other
advantage is that it tends to bring coefficient values closer to "reality"
in a physical sense. The biggest disadvantage is that there is no logical
stopping point at some "optimum" set of coefficient values. This is why it
is seldom used except in industry, where valid prediction is more important
than the "correct" model.
DAHeiser
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