Ridge Regression: Biased Estimation for Nonorthogonal ProblemsAuthor(s): Arthur E. Hoerl and Robert W. KennardSource: Technometrics, Vol. 42, No. 1, Special 40th Anniversary Issue (Feb., 2000), pp. 80-86
In multiple regression it is shown that parameter estimates based on minimum residual sum of
squares have a high probability of being unsatisfactory, if not incorrect, if the prediction vectors
are not orthogonal. Proposed is an estimation procedure based on adding small positive quantities
to the diagonal of X'X. Introduced is the ridge trace, a method for showing in two dimensions the
effects of nonorthogonality. It is then shown how to augment X'X to obtain biased estimates with
smaller mean square error.