Variable Selection via Biased Estimators in the Linear Regression Model

Abstract

Least Absolute Shrinkage and Selection Operator (LASSO) is used for variable selection as well as for handling the multicollinearity problem simultaneously in the linear regression model. LASSO produces estimates having high variance if the number of predictors is higher than the number of observations and if high multicollinearity exists among the predictor variables. To handle this problem, Elastic Net (ENet) estimator was introduced by combining LASSO and Ridge estimator (RE). The solutions of LASSO and ENet have been obtained using Least Angle Regression (LARS) and LARS-EN algorithms, respectively. In this article, we proposed an alternative algorithm to overcome the issues in LASSO that can be combined LASSO with other exiting biased estimators namely Almost Unbiased Ridge Estimator (AURE), Liu Estimator (LE), Almost Unbiased Liu Estimator (AULE), Principal Component Regression Estimator (PCRE), r-k class estimator and r-d class estimator. Further, we examine the performance of the proposed algorithm using a Monte-Carlo simulation study and real-world examples. The results showed that the LARS-rk and LARS-rd algorithms , which are combined LASSO with r-k class estimator and r-d class estimator , outperformed other algorithms under the moderated and severe multicollinearity.