Multicollinearity and maximum entropy leuven estimator

Economics Bulletin, 2004, vol. 3, issue 25, pages 1-11

Abstract: Multicollinearity is a serious problem in applied regression analysis. Q. Paris (2001) introduced the MEL estimator to resolve the multicollinearity problem. This paper improves the MEL estimator to the Modular MEL (MMEL) estimator and shows by Monte Carlo experiments that MMEL estimator performs significantly better than OLS as well as MEL estimators.

Keywords: maximum entropy; MEL estimator; MMEL estimator; Monte Carlo experiments; multicollinearity; regression analysis (search for similar items in EconPapers)
JEL-codes: C1 (search for similar items in EconPapers)
Date: 2004 Written 2004-07-15
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