We argue in this paper that general ridge (GR) regression implies no major complication compared with simple ridge regression. We introduce a generalization of an explicit GR estimator derived by Hemmerle and by Teekens and de Boer and show that this estimator, which is more conservative, performs better than the Hoerl and Kennard estimator in terms of a weighted quadratic loss criterion.

Econometric Institute Research Papers
Report / Econometric Institute, Erasmus University Rotterdam
Erasmus School of Economics